Ayayai Incorporated leases a piece of equipment to Kingbird Corporation on January 1, 2020. The lease agreement called for annual rental payments of $6,823 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 5 years, a fair value of $26,300, a book value of $21,300, and both parties expect a residual value of $8,300 at the end of the lease term, though this amount is not guaranteed. Ayayai set the lease payments with the intent of earning a 6% return, and Kingbird is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)

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Chapter1: Financial Statements And Business Decisions
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Ayayai Incorporated leases a piece of equipment to Kingbird Corporation on January 1, 2020. The lease agreement called for annual rental payments of $6,823 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 5 years, a fair value of $26,300, a book value of $21,300, and both parties expect a residual value of $8,300 at the end of the lease term, though this amount is not guaranteed. Ayayai set the lease payments with the intent of earning a 6% return, and Kingbird is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)

 

 

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