Assume grant uses straight-line depreciation. what are the, Ask an Expert

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On January 2, 2006, Grant Corporation leases an asset to Pippin Corporation under the following conditions:

1. Annual lease payments of $10,000 for twenty years.

2. At the end of the lease term the asset is expected to have a value of $2,750.

3. The fair market value of the asset at the inception of the lease is $92,625.

4. The estimated economic life of the lease is thirty years.

5. Grant's implicit interest rate is 12%; Pippin's incremental borrowing rate is 10%.

6. The asset is recorded in Grant's inventory at $75,000 just prior to the lease transaction.

c. Assume Grant uses straight-line depreciation. What are the income statement, balance sheet, and statement of cash flow effects for 2006?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9408197

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