Questions by okey43 - Page 54
Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. OnSeptember 30, 2021, the company leased a delivery truck to a local florist, Anything Grows. The fiscal year for both companies endsDecember 31. The lease agreement specified quarterly payments of $3,400 beginning September 30, 2021, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023, for $6,800 when it was expected to have a residual value of $11,200. The estimated useful life ofthe truck is four years. Mid-South Auto Leasing's quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $28,360 for the truck. Both companies use straight-line depreciation or amortization. Anything Grows' incrementalinterest rate is 12%.Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option wasexercised on that date.