ACCT 304 Chapter 16 QUIZ

ACCT 304 Chapter 16 QUIZ
E21 5 Type of Lease Amortization Schedule Jacobsen Leasing Company leases a new machine that
has a cost and fair value of $75,000 to Stadler Corporation on a 3-year noncancelable contract. Stadler
Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and
maintenance. The machine has a 3-year useful life and no residual value. The lease was signed on January
1, 2012. Jacobsen Leasing Company expects to earn a 9% return on its investment. The annual rentals are
payable on each December 31.

Instructions
(a) Discuss the nature of the lease arrangement and the accounting method that each party to the lease
should apply.
(b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that
covers all the years involved.

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