Assume a company (lessee) signs a lease for a forklift with the following predicates: Fair value of the forklift is $16,000 Lease term is 3 years Monthly payments of $500/month paid in advance $50 of the monthly payment is related to the maintenance Interest rate a bank would charge this company for a $16,000 loan over 3 years is 4% of the Useful Life of the forklift is 5 years Required: At the end of the lease term, the company can purchase the forklift for $1,000, which is the estimated fair value at the end of the lease
Assume a company (lessee) signs a lease for a forklift with the following predicates: Fair value of the forklift is $16,000 Lease term is 3 years Monthly payments of $500/month paid in advance $50 of the monthly payment is related to the maintenance Interest rate a bank would charge this company for a $16,000 loan over 3 years is 4% of the Useful Life of the forklift is 5 years Required: At the end of the lease term, the company can purchase the forklift for $1,000, which is the estimated fair value at the end of the lease
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION 1 Assume a company (lessee) signs a lease for a forklift with the following predicates: Fair value of the forklift is $16,000
Lease term is 3 years
Monthly payments of $500/month paid in advance
$50 of the monthly payment is related to the maintenance Interest rate a bank would charge this company for a $16,000 loan over 3 years is 4% of the Useful Life of the forklift is 5 years
Required: At the end of the lease term, the company can purchase the forklift for $1,000, which is the estimated fair value at the end of the lease
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