Marin enters into an agreement with Traveler Inc. to lease a car on December 31, 2019. The following information relates to this agreement.

1.The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term.2.The fair value of the car was $15,540 at commencement of the lease.
3.Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2020. The first payment is to be of an amount of $5,752.82, with each payment
increasing by a constant rate of 5% from the previous payment (i. e., the second payment will be $6,040.46 and the third and final payment will be $6,342.48).
4.Marin’ incremental borrowing rate is 8%. The rate implicit in the lease is unknown.

Solution:

Date                Account Titles & Explanation                 Debit       Credit  

12/31/2019                 Leased Car                                    18,780

                                Lease Liability                                              18,780.00  

(Initial recording of leased car at fair value)  

12/31/2020              Interest Expense                           1,502.40

                                   Lease Liability                            5,449.60

                                       Cash                                                       6,952.00

(Interest expenses and payment recorded)  

12/31/2020        Depreciation Expense on Car             6,260.00

                    Accumulated Depreciation on Car                           6,260.00

(Depreciation recognized on leased car)

12/31/2021               Interest Expense                          1,066.43

                                 Lease Liability                              6,233.17

                                   Cash                                                           7,299.60

(Interest expenses and payment recorded)

12/31/2018          Depreciation Expense on Car           6,260.00

                      Accumulated Depreciation on Car                         6,260.00

(Depreciation recognized on leased car)  

Calculation of Interest  

Date         Cash Payment       Interest Expense       Lease Liability

12/31/2016                                                                    18,780.00

12/31/2017     6,952.00               1,502.40                  13,330.40

12/31/2018        7,299.60             1,066.43                  7,097.23

12/31/2019         7,664.58              567.78                           0.43  

Depreciation as per SIM method Depreciation

= Fair Value of Asset / Useful life Depreciation = 18780/3 = 6260  

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-lavira : )

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know