Reference no: EM132996148
Question - The following is an irrevocable contract agreement between Astero Leasing Company (Lessor) Ltd and Geox Ltd as a lessee for 5 years to lease a machine on January 1, 2018. The following is information regarding the lease agreement above:
1. This agreement requires rental payments of $20,829.49 starting when the contract is signed for 5 years.
2. Fair Value of the machine on January 1, 2018 $81,000.
3. The machine has an estimated useful life of 5 years, with a guaranteed residual value of $4,000. Machinery depreciation using the straight-line method.
4. The incremental loan interest rate is 12% per annum. The implicit interest rate of 10% is known to the Lesse.
5. Annual rental payments include a $2,000 tax-related executory fee.
Required -
1. Calculate the Value capitalized by the lessee.
2. Calculate the annual lease payment by the Lessor.
3. Create a table of amortization for the lessor and the lessee for the first 2 years.
4. Prepare the journal entries required by the lessor and lessee for the first 2 years.
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