Question
18. Bird leased equipment that had a retail cash selling price of $1,200,000 and a useful life of five years with no residual value. The
18. Bird leased equipment that had a retail cash selling price of $1,200,000 and a useful life of five years with no residual value. The lessor paid $1,060,000 to acquire the equipment and used an implicit rate of 8% when calculating annual lease payments of $278,284 beginning January 1, at the beginning of the lease. Incremental costs of negotiating and consummating the completed lease transaction incurred by the lessor were $30,000. What is the increase in the lessors earnings during the first year as a result of the lease (ignore taxes)? (Round your answer to the nearest whole dollar amount.)
A. Decrease in earnings by $164,839 B. Increase in earning by $171,242 C. Decrease in earnings by $178,625 D. Increase in earnings by $183,737.
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