Question
Novak Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10
Novak Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $520,677, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,100. The hospital will pay rents of $63,000 at the beginning of each year. Novak incurred costs of $239,000 in manufacturing the machine and $14,700 in legal fees directly related to the signing of the lease. Novak has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Prepare a 10-year lease amortization schedule for Novak, the lessor.
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