Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 2P
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Question
5...new..B
Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
(b)
Prepare a 10-year lease amortization schedule for Indigo, the lessor. (Round answers to 0 decimal places e.g. 5,275.)
INDIGO INC. (Lessor)
Lease Amortization Schedule (Annuity due basis, guaranteed residual value) |
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Beginning
of Year |
Annual Lease Payment
Plus Residual Value |
Interest on
Lease Receivable |
Recovery of Lease
Receivable |
Lease
Receivable |
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Initial PV |
$
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$
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$
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$
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1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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7 |
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8 |
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9 |
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10 |
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End of 10 |
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$
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$
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$
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