Corporate Accounting

11. On 1 July 2019, Homes Company leased a vehicle from Den Company. The vehicle cost Den $39,654.60 considered to be its fair value on that same day. The finance lease agreement contained the following provisions:

• The lease term is 3 years, starting on 1 July 2019.
• Estimated useful life the Vehicle is 5 years.
• Annual lease Payment, payable on 30 June each year is $12,000
• Estimated Residual Value of the vehicle at the end of the lease is $10,000.
• Residual Value Guaranteed by Company Homes is 6,000.
• Interest rate implicit in the lease is 7%.
• Present value of an annuity: PVIFA (T3, 7%, 3Y) = 2.6243
• Present value of $1: PVIF (T1, 7%, 3Y) = 0.8163

The PV of the lease payment by company Homes (lessee) at 1 July 2019 will be:

Select one:

a. $33,589.40

b. $36,389.40

c. $39,654.40

d. $37,389.40