Question
Bird leased equipment that had a retail cash selling price of $1,165,000 and a useful life of five years with no residual value. The lessor
Bird leased equipment that had a retail cash selling price of $1,165,000 and a useful life of five years with no residual value. The lessor paid $1,063,000 to acquire the equipment and used an implicit rate of 7% when calculating annual lease payments of $231,000 beginning January 1, at the beginning of the lease. Incremental costs of negotiating and consummating the completed lease transaction incurred by the lessor were $11,600. What is the effect of the lease on the lessor's earnings during the first year (ignore taxes)? (Round your answer to nearest whole dollar amount.)
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