On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $865,757 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $121,000. Negotiations led to the lessee guaranteeing a $182,000 residual value. Equal payments under the lease are $221,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments.

On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $865,757 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $121,000. Negotiations led to the lessee guaranteeing a $182,000 residual value. Equal payments under the lease are $221,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

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