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Cullumber Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Marigold Limited a replicator that cost $266,600 to manufacture and
Cullumber Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Marigold Limited a replicator that cost $266,600 to manufacture and usually sells for $412,000. The lease agreement covers the replicator's 8-year useful life and requires 8 equal annual rentals of $71,111 each, beginning May 29, 2020. The equipment reverts to Cullumber at the end of the lease, at which time it is expected that the replicator will have a residual value of $40,500, which has been guaranteed by Marigold, the lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
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