A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the assets useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 8%. The lessors fiscal year is the calendar year. The lessor manufactured this asset at a cost of $129,000. (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).

b. Create a partial amortization through the first payment on January 1, 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 (ignore taxes)?

Part a:

PV factors based on
Table or Calculator function:	PVAD of $1
Lease Payment	$50,000
n =	4
i =	8.0%
PV of Lease	$178,855

Part B:

Date	Cash Interest Received	Effective Interest	Decrease in Balance	Outstanding Balance
01/01/2016				$178,855
01/01/2016	$50,000		$50,000	128,855
01/01/2017	50,000	10,308	39,692	89,163

Part 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 (ignore taxes)?