SOLVED

11) Chambers leased equipment to Montga Company on November 1, 2016. The terms of the lease are as follows: Lease term 10 years Economic life of leased asset 12 year Fair value of leased asset 104,000 Guaranteed residual value 10,000 Lease payments, due each Nov 1 12,000 Lessee’s incremental borrowing rate 5% Montga uses straight-line depreciation for its property, plant, and equipment. Â Required: a. Prepare the journal entries for the lease from November 1 through December 31, 2016. b. You and the director of finance for Montga Company. You are concerned about the impact the lease will have on your key performance indicator, the total debt to total assets ratio. Discuss the impact the lease will have on this performance indicator. 12) The following are characteristics of a lease: Price of leased asset from manufacturer 312,100 Lease payments 100,000 Lease term 4 years Lease frequency Annual Payment timing End of year Guaranteed residual value 35,000 Interest rate implicit in the lease agreement 14% Required: 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.