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Merlin Company leased equipment to Houdini Incorporated The equipment cost the lessor $ 2 0 4 , 0 0 0 . The appropriate interest rate

Merlin Company leased equipment to Houdini Incorporated The equipment cost the lessor $204,000. The appropriate interest rate for this lease is 15%. The annual lease payments are made at the end of each year. The lease term is three years. The residual value at the end of the lease term is expected to be $42,000. Houdini has the option to purchase the equipment at that time for $21,000. Assume this is a sales-type lease without selling profit.
ni/
PV of $1 PV, ordinary annuity PV, annuity due
1 period, 15%0.869570.869571.00000
2 periods, 15%0.756141.625711.86957
3 periods, 15%0.657522.283232.62571
Required:
For this lease:
The lease payment computed by the lessor is $_________blank.
The amount the lessee should record as an asset is $_________blank.
How much interest should be recognized at the end of year 1 by the:
Lessor? $_________blank
Lessee? $_________

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