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Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: Duration of lease Life of leased asset Unguaranteed residual 15 years 17 years $5,000 Lease payment $6,000 at lease inception Annual lease payments (in arrears) $4,500 per year (15 payments) If the interest rate implicit in the lease is 8%, what is the fair value of the equipment at the inception of the lease? A. $44,518 B. $46,094 C. $40,094 D. $48,399

Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: Duration of lease Life of leased asset Unguaranteed residual 15 years 17 years $5,000 Lease payment $6,000 at lease inception Annual lease payments (in arrears) $4,500 per year (15 payments) If the interest rate implicit in the lease is 8%, what is the fair value of the equipment at the inception of the lease? A. $44,518 B. $46,094 C. $40,094 D. $48,399

FINANCIAL ACCOUNTING
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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Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: Duration of lease Life of leased asset Unguaranteed residual 15 years 17 years $5,000 Lease payment $6,000 at lease inception Annual lease payments (in arrears) $4,500 per year (15 payments) If the interest rate implicit in the lease is 8%, what is the fair value of the equipment at the inception of the lease? A. $44,518 B. $46,094 C. $40,094 D. $48,399
Transcribed Image Text:Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: Duration of lease Life of leased asset Unguaranteed residual 15 years 17 years $5,000 Lease payment $6,000 at lease inception Annual lease payments (in arrears) $4,500 per year (15 payments) If the interest rate implicit in the lease is 8%, what is the fair value of the equipment at the inception of the lease? A. $44,518 B. $46,094 C. $40,094 D. $48,399
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