question archive On December 31, 2020, Reagan Inc
On December 31, 2020, Reagan Inc
Subject:AccountingPrice:2.87 Bought7
On December 31, 2020, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2026. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below:
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Answer:
Effective Annual interest Rate = Interest Expenses/ Carrying Value
Effective interest rate = 24,363 /348,042 = 7%
