Prepare a lease amortization schedule for Lester Company

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Reference no: EM132637723

Question - Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, Hayes Corp. leases ten trailers to Lester Company under a six-year non-cancelable lease agreement. The following information about the lease and the trailers is provided:

1) Annual payment of $120,175 is due on January 1, 2021 and at December 31 from 2021 to 2025. Hayes Corp. has an implicit rate of 8% (present value factor for 6 periods at 8% is 4.99271).

2) Titles to the trailers pass to Lester at the end of the lease.

3) The fair value of each trailer is $60,000. The cost of each trailer to Hayes Corp. is $54,000. Each trailer has an expected useful life of nine years.

4) Collectibility of the lease payments is probable.

Instructions -

(a) What type of lease is this for the Lester Company and Hayes Corp?

(b) Prepare a lease amortization schedule for Lester Company till 12/31/2021.

Reference no: EM132637723

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