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Business, 16.04.2020 18:40 neirabrandon516

Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. Davis agrees to pay all executory costs directly to a third party. The interest rate implicit in the lease is 14%. The initial direct costs are insignificant and assumed to be zero. It is probable that Edom will collect the lease payments.

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