On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $820,000 and has an expected useful life of eight years. Its normal sales price is $820,000. The residual value after six years is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The Interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Calculate the amount of the annual lease payments. (Enter amounts as positive values rounded to the nearest whole dollar.) Guaranteed Residual Value Table or calculator function: Amount to be recovered (fair value) Guaranteed residual value Amount to be recovered through periodic lease payments Lease Payment Table or calculator function: Amount of each annual lease payment. n= j= n= Present value Lease Payments

On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $820,000 and has an expected useful life of eight years. Its normal sales price is $820,000. The residual value after six years is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The Interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Calculate the amount of the annual lease payments. (Enter amounts as positive values rounded to the nearest whole dollar.) Guaranteed Residual Value Table or calculator function: Amount to be recovered (fair value) Guaranteed residual value Amount to be recovered through periodic lease payments Lease Payment Table or calculator function: Amount of each annual lease payment. n= j= n= Present value Lease Payments

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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Answer

	Present value
Amount to be recovered	820000
Guaranteed residual value (PV6%,6*residual value)	.7049* 200000=140992
Amount to be recovered through periodic lease payments	679008
Lease payment
n=	6
i=	6%
	Lease payment
Amount of fair value recovered each lease payment

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