LOR Leased to LEE a Computer That Cost LOR $20,000

question 107

Essay

LOR leased to LEE a computer that cost LOR $20,000.The explicit interest rate is 20%; rentals are
paid at each year-end; and the lease term is three years.Residual value at the end of the lease term is
$2,000.Assume a direct financing lease.

Requirement 1:
LEE retains the computer at the end of the lease term at a BPO cost of $1,500.
(a)The rental amount computed by LOR is $ _.
(b)The amount LEE should capitalize is $ _.

Requirement 2:
How much interest should be recognized at the end of year 1, in the above situation, by: (a)LOR?
$________ (b)LEE? $________

Requirement 3:
At the end of year 1, in the above situation, how much would the principal be reduced for (a)LOR's lease receivable?
$ and (b)LEE's lease liability?
$________.

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Definitions:

Succession Management Plans

Strategies developed by organizations to identify and prepare future leaders to fill key positions within the company, ensuring leadership continuity.

Succession Management

A process in an organization to ensure that employees are recruited and developed to fill each key role within the company over time.

Developmental Opportunities

Initiatives or programs designed to enhance skills, knowledge, and competencies, leading to personal and professional growth.

Talent Pool Risk

The potential negative consequences associated with managing or relying on a group of skilled individuals, which can impact organizational goals and performance.