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Determine a lease term ends for accounting purposes

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Reference no: EM132463160

Question 1: Mid-South Auto Leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent florist, Anything Grows. The fiscal year for both companies ends December 31.

  • The lease agreement specified quarterly payment of 7000 beginning September 30, 202, The beginning of the lease, and each quarter (December 31,March 31, and June 30) Through June 30,2024(three-year lease term). The florist had the option to purchase the truck on September 29,2023, for 14000, when it was expected to have a residual value of 19500. The estimated useful life of the truck is four years. Mid-south Auto Leasing quarterly interest rate for determining payments was 2% (approximately 8% annually). Mid-South paid 60000 for the truck. Both companies use straight -line depreciations or amortizations. Anything Grows' incremental interest rate is 8%.

Hint: A lease term ends for accounting purposes when an option becomes exercisable if its expected to be exercised.

Reference no: EM132463160

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