The Following Are Characteristics of a Lease Requirement
Determine the Appropriate Classification for This Lease for the l

question 82

Essay

The following are characteristics of a lease:
$$\begin{array} { | l | l | } \hline \text { Price of leased asset from manufacturer } & 193,000 \\\hline \text { Lease payments } & 50,000 \\\hline \text { Lease term } & 5 \text { years } \\\hline \text { Lease frequency } & \text { Annual } \\\hline \text { Payment timing } & \text { End of year } \\\hline \text { Guaranteed residual value } & 35,000 \\\hline \text { Interest rate implicit in the lease agreement } & 14 \% \\\hline\end{array}$$ Requirement
Determine the appropriate classification for this lease for the lessor (who is not the manufacturer)and record the journal entries for the lessor for the first year of the lease.

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Definitions:

Retained Earnings

Represents the portion of net income that is not distributed to shareholders but retained by the company for reinvestment in its operations or to pay debt.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders as dividends, typically expressed as a percentage.

Profit Margin

A financial metric that measures the extent to which a company or a business activity makes money, expressed as a percentage of revenues.

Dividend Payout Ratio

A financial metric that shows what portion of a company's earnings is distributed to shareholders in the form of dividends.