The following facts pertain to a non-cancelable lease agreement between Jameson Leasing Company and Axel Company, a lessee.
May 1, 2013
Annual lease payment due at the beginning of
each year, beginning with May 1, 2013
Bargain purchase option price at end of lease term
Economic life of Leased Equipment under Capital Leases
Fair value of asset at May 1, 2013
Lessor’s implicit rate
Lessee’s incremental borrowing rate
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.
PV of annuity due = 4.03735
PV of $1 = 0.56743
What is the nature of this lease for Axel Company? Why?
What is the nature of this lease for Jameson Company? Why?
Prepare a lease amortization schedule for Axel Company for the 5 year term.
d) Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the first year Ac€?o 2013.