Turpin Corp., which uses ASPE, leases a car to Jaimme DeLory on June 1, 2014. The term of the…

 
   

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Turpin Corp., which uses ASPE, leases a car to Jaimme DeLory on June 1, 2014. The term of the non-cancellable lease is 48 months. The following information is provided about the lease. 1. The lessee is given an option to purchase the automobile at the end of the lease term for $5,000. 2. The automobile s fair value on June 1, 2014, is $29,500. It is carried in Turpin s inventory at $21,200. 3. The car has an economic life of seven years, with a $1,000 residual value at the end of that time. The car s estimated fair value is $10,000 after four years, $7,000 after five years, and $2,500 after six years. 4. Turpin wants to earn a 12% rate of return (1% per month) on any financing transactions. 5. Jaimme DeLory represents a reasonable credit risk and no future costs are anticipated in relation to this lease. 6. The lease agreement calls for a $1,000 down payment on June 1, 2014, and 48 equal monthly payments on the first of each month, beginning June 1, 2014. Instructions (a) Determine the amount of the monthly lease payment using present value tables, a financial calculator, or computer spreadsheet functions. Round to the nearest cent. (b) What type of lease is this to Turpin Corp.? Explain. (c) Prepare a lease amortization schedule for the 48-month lease term using a computer spreadsheet. (d) Prepare the entries that are required, if any, on December 31, 2014, Turpin s fiscal year end. (e) How much income will Turpin report on its 2014 income statement r