Reference no: EM133927215

Problem

A company leased a tooling machine on January 1, Year 1, for a three-year period ending December 31, Year 3. The lease agreement specified annual payments of $42,000 beginning with the first payment at the beginning of the lease, and each December 31 through Year 2. The company had the option to purchase the machine on December 30, Year 3, for $51,000 when its fair value was expected to be $66,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. The company was aware that the lessor's implicit rate of return was 12%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Calculate the amount the company should record as a right-of-use asset and lease liability for this finance lease. Prepare an amortization schedule that describes the pattern of interest expense for the company over the lease term. Get the instant assignment help. Prepare the appropriate entries for the company from the beginning of the lease through the end of the lease term.