$90,000 on January 1 beginning with the current year.
Life of Asset
Fair value of Asset
Implicit interest rate
There is no expected residual value or bargain purchase option. Assume that depreciation expense is computed at December 31 of each year.
Refer to Stillwater Sports:
1. What type of lease is this lease for Premier Leasing.
2. Prepare appropriate journal entries for Premier Leasing for the first year.
3. Show how the lease will be presented on Premier’s financial statements for the first year.
What will be an ideal response?
1. This is a direct-financing lease for Premier Leasing, because there is no manufacturer’s profit involved.
2. Journal Entries
$[(326,189 – 90,000) × 7%]
Interest Receivable $16,533
Lease Receivable 73,467
Lease Receivable $162,722