Lessee entries-capital lease with unguaranteed residual

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Reference no: EM13763268

(Lessee Entries; Capital Lease with Unguaranteed Residual Value) On January 1, 2014, Manor Inc. signed a 6-year noncancelable lease for a printing press. The terms of the lease called for Manor to make annual payments of $54,291 at the beginning of each year, starting January 1, 2014. The printing press has an estimated useful life of 6 years and a $10,000 unguaranteed residual value. The printing press reverts back to the lessor at the end of the lease term. Manor uses the straight-line method of depreciation for all of its plant assets. Manor's incremental borrowing rate is 12%, and the Lessor's implicit rate is unknown.

Instructions

(a) What type of lease is this? Explain.

(b) Compute the present value of the minimum lease payments.

Reference no: EM13763268

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