Headland Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Sage Medical Center for a period of 10 years. The normal selling price of the machine is $528,109, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $64,000 at the beginning of each year. Headland incurred costs of $263,000 in manufacturing the machine and $14,200 in legal fees directly related to the signing of the lease. Headland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sage Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000. Discuss the nature of this lease in relation to the lessee. The nature of this lease in relation to the lessee is Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 5,275.) Initial Lease Liability $
Headland Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Sage Medical Center for a period of 10 years. The normal selling price of the machine is $528,109, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $64,000 at the beginning of each year. Headland incurred costs of $263,000 in manufacturing the machine and $14,200 in legal fees directly related to the signing of the lease. Headland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sage Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000. Discuss the nature of this lease in relation to the lessee. The nature of this lease in relation to the lessee is Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 5,275.) Initial Lease Liability $
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 3P
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Give me three steps solution and explanation.
![Headland Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Sage Medical Center for a period of 10
years. The normal selling price of the machine is $528,109, and its guaranteed residual value at the end of the non-cancelable lease
term is estimated to be $15,000. The hospital will pay rents of $64,000 at the beginning of each year. Headland incurred costs of
$263,000 in manufacturing the machine and $14,200 in legal fees directly related to the signing of the lease. Headland has
determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sage Medical Center has
an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000.
Discuss the nature of this lease in relation to the lessee.
The nature of this lease in relation to the lessee is
Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final
answer to O decimal places e.g. 5,275.)
Initial Lease Liability
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc53f291-0f33-4a04-877c-fec61b9428a2%2F5b18b315-31c7-4095-90fa-9ca633205da2%2F9uk31u_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Headland Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Sage Medical Center for a period of 10
years. The normal selling price of the machine is $528,109, and its guaranteed residual value at the end of the non-cancelable lease
term is estimated to be $15,000. The hospital will pay rents of $64,000 at the beginning of each year. Headland incurred costs of
$263,000 in manufacturing the machine and $14,200 in legal fees directly related to the signing of the lease. Headland has
determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sage Medical Center has
an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000.
Discuss the nature of this lease in relation to the lessee.
The nature of this lease in relation to the lessee is
Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final
answer to O decimal places e.g. 5,275.)
Initial Lease Liability
$
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