A lease agreement that qualifies as a finance lease calls for annual lease payments of $16,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below.
A lease agreement that qualifies as a finance lease calls for annual lease payments of $16,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A lease agreement that qualifies as a finance lease calls for annual lease payments of $16,000 over a four-year lease term (also the
asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%.
Required:
a. Determine the present value of the lease upon the lease's inception.
b. Create a partial amortization table through the second payment on January 1, Year 2.
c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its
income statement for the first year ended December 31 (ignore taxes)?
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Required A Required B
Determine the present value of the lease upon the lease's inception.
Note: Round your answers to nearest whole number and round percentage answer to 1 decimal place.
PV factors based on
Table or Calculator function:
Lease Payment
PV of Lease
Required C
n =
i =
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