A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the assets useful life), with the first payment at January 1, 2016, the beginning of the lease. The interest rate is 5%. The lessors fiscal year is the calendar year. The lessor manufactured this asset at a cost of $125,000. (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.) Required:

a. Determine the price at which the lessor is selling the asset (present value of the lease payments).

PV factors based on
Table or Calculator function:
Lease Payment
n =
i =
PV of Lease

b. Create a partial amortization schedule through the second payment on January 1, 2017

Date Cash Interest Received Effective Interest Decrease in Balance Outstanding Balance

01/01/2016

01/01/2016

01/01/2017

. c. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31, 2017 (ignore taxes)?

Pretax impact on income related to the lease:
Total pretax impact on income