Question

Crane Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $85,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Crane expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Click here to view factor tables. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to o decimal places e.g. 5,275.) Interest Revenue/ Expense Reduction of Principal Receivable/ Liability 1/1/20 12/31/20 12/31/21 12/31/22

Answer 1

Annual Lease payment = Fair value of asset /PVAIF for 3 years
=$85500/2.57710
=$33177
Amortization schedule
Date	Receipt / Payment	Interest Revenue / Expenses	Reduction Of Principal	Recoverable / Liability
01-01-2020	$                               -	$                                                     -	$                                       -	$                              85,500
12/31/2020	$                      33,177	$                                              6,840	$                              26,337	$                              59,163
12/31/2021	$                      33,177	$                                              4,733	$                              28,444	$                              30,719
12/31/2022	$                      33,177	$                                              2,458	$                              30,719	$                                       -0