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

Inception date: May 1, 2014

Annual lease payment due at the beginning of

each year, beginning with May 1, 2014 …….. $21,227.65

Bargain-purchase option price at end of lease term …… $ 4,000.00

Lease term …………………… 5 years

Economic life of leased equipment ………….. 10 years

Lessor’s cost ………………… $65,000.00

Fair value of asset at May 1, 2014 ………… $91,000.00

Lessor’s implicit rate ……………….. 10%

Lessee’s incremental borrowing rate ………….. 10%



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