A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000 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 8%. The lessor's fiscal year is the calendar year The lessor manufactured this asset at a cost of $100,000. Required: Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Create a partial amortization table through the second payment on January 1, Year 2. What would be the increase in earnings that the lessor 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 S 1, PV of $1, FVA of $1, PVA of S1, FVAD of $1 and PVAD of $1)

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
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A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000
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 8%. The lessor's fiscal year is the calendar year.
The lessor manufactured this asset at a cost of $100,000. Required: Determine the price at
which the lessor is "selling" the asset (present value of the lease payments). Create a partial
amortization table through the second payment on January 1, Year 2. What would be the
increase in earnings that the lessor 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 S
1, PV of $1, FVA of $1, PVA of S1, FVAD of $1 and PVAD of $1)
Transcribed Image Text:A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000 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 8%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $100,000. Required: Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Create a partial amortization table through the second payment on January 1, Year 2. What would be the increase in earnings that the lessor 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 S 1, PV of $1, FVA of $1, PVA of S1, FVAD of $1 and PVAD of $1)
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