On December 31, 2020, the lessor company leases equipment to the lessee company with 8 equal annual payments of $113,000 each, payable beginning December 31, 2020. The lessee company agrees to guarantee the $61,000 residual value of the asset at the end of the lease term. The expected value of the residual is $13,000. The lessee’s incremental borrowing rate is 10%, and the lessor’s implicit interest rate is not known by the lessee. What is the amount of initial lease liability the lessee should record on December 31, 2020? (You must choose from the following present/future values.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 10%, 8 periods 2.14 0.47 11.44 5.33 5.87
On December 31, 2020, the lessor company leases equipment to the lessee company with 8 equal annual payments of $113,000 each, payable beginning December 31, 2020. The lessee company agrees to guarantee the $61,000 residual value of the asset at the end of the lease term. The expected value of the residual is $13,000. The lessee’s incremental borrowing rate is 10%, and the lessor’s implicit interest rate is not known by the lessee. What is the amount of initial lease liability the lessee should record on December 31, 2020? (You must choose from the following present/future values.)
|
|
Future Value Single Sum |
Present Value Single Sum |
Future Value Ordinary Annuity |
Present Value Ordinary Annuity |
Present Value Annuity Due |
|
10%, 8 periods |
2.14 |
0.47 |
11.44 |
5.33 |
5.87 |
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