Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.Lease PaymentCash PaymentEffective InterestDecrease in BalanceOutstanding Balance 32,350 17,000 ?? ?? 25,350 27,000 1,775 5,225 20,125 37,000 1,409 5,591 14,534 47,000 1,017 5,983 8,551 57,000 ?? ?? ?? 62,300 150 2,150 0 What is the outstanding balance after payment 5?$2,150.$2,300.$2,450.$4,450.

The lease payment are the periodic payments made to use the assets that belongs to another and no…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.

Lease Payment	Cash Payment	Effective Interest	Decrease in Balance	Outstanding Balance
						32,350
1	7,000		??		??	25,350
2	7,000		1,775		5,225	20,125
3	7,000		1,409		5,591	14,534
4	7,000		1,017		5,983	8,551
5	7,000		??		??	??
6	2,300		150		2,150	0

What is the outstanding balance after payment 5?

$2,150.
$2,300.
$2,450.
$4,450.

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