The Following Information Relates to a Lease Contract: Lease Inception

question 126

Essay

The following information relates to a lease contract: Lease inception = 1-1-x1
Market value and book value (to lessor)of New equipment under lease = $10,000 Interest rate used by both lessee and lessor The lease allows the lessee to purchase the asset for $200 on 1-1-x4.
There are no uncertainties with respect to collectability of lease payments, or performance by lessor.
(a)Determine the annual lease payment
(b)Classify the lease for the lessee
(c)Record the 2014 entries

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Definitions:

Federal Level

Relating to or denoting the central government as distinguished from the separate units constituting a federation.

Transfer Program

A government initiative designed to redistribute income through the transfer of money from one group to another.

Temporary Assistance

Short-term aid or support provided by governments or organizations to individuals or families in need.

Needy Families

Households lacking sufficient income or resources to maintain an adequate standard of living, often targeted by social assistance programs.