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Lessor Inc. acquired packing equipment for $450,000 on January 2018, and leased it to Lessee Co. The lease would commence on Jan. 2018 and last
Lessor Inc. acquired packing equipment for $450,000 on January 2018, and leased it to Lessee Co. The lease would commence on Jan. 2018 and last 5 years. Lessee Co. was required to make 5 equal annual lease payments, each to be made at the beginning of the year. At the end of the 5-year lease, Lessee Co. would have the option of purchasing the equipment for $15,000, when the equipment was expected to have a fair value of $20,000. Lessor Inc. wished to earn an 8% return (before taxes) on the lease arrangement and set the annual lease payment accordingly. Lessor Inc. had a Dec. 31 fiscal year-end. Required: (1) What was the annual lease payment? Use present value factors from the tables attached for calculations. (2) Prepare a lessor lease amortization schedule for Lessor Inc. for the 5-year period
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