Question
12. Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer
12. Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable. Payment Cash Payment Effective Interest Decrease in balance Outstanding Balance 75,939 1 12,000 0 12,000 63,939 2 12,000 7,673 4,327 59,612 3 12,000 7,153 4,847 54,765 4 12,000 6,572 5,428 49,337 5 12,000 5,920 6,080 43,257 6 12,000 5,191 6,809 36,448 7 12,000 4,374 7,626 28,822 8 12,000 3,459 8,541 20,281 9 12,000 ? ? ? 10 12,000 ? ? ? What is the effective annual interest rate? (Round final answer to the nearest whole percentage.) Multiple Choice 9%. 12%. 14%. 10%.
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