The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee.

Inception date ……………. January 1, 2014

Annual lease payment due at the beginning of

each year, beginning with January 1, 2014 ….. $124,798

Residual value of equipment at end of lease term,

guaranteed by the lessee ………….. $50,000

Lease term ……………….. 6 years

Economic life of leased equipment ………. 6 years

Fair value of asset at January 1, 2014 ……… $600,000

Lessor’s implicit rate ……………… 12%

Lessee’s incremental borrowing rate ………… 12%



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