Question
Lessor Co. signs a lease agreement on January 1, 2021, to lease equipment to Lessee Co. The term of the non-cancelable lease is 8 years,
Lessor Co. signs a lease agreement on January 1, 2021, to lease equipment to Lessee Co. The term of the non-cancelable lease is 8 years, and an annual payment of 80,000 is required at the end of each year. The useful economic life of the asset is 8 years, with an unguaranteed residual value of $20,000. Lessor Co. desires to earn a return of 10% (lessors implicit rate) on its investment. In the journal entry made on January 1, 2021, how much should Lessor Co. record for Lease Receivable? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.)
For n=8, i=10%,
Future value of a single sum: 2.14
Present value of a single sum: 0.47
Future value of an ordinary annuity of $1: 11.44
Present value of an ordinary annuity of $1: 5.33
Present value of an annuity due of $1: 5.87
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started