Question
On December 31, 2020, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are
On December 31, 2020, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2026. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease.
Silver's lease amortization schedule appears below.
| Dec. 31 | Payments | Interest | Decrease in Balance | Outstanding Balance | ||||||||||
| 2020 | $ | 519,115 | ||||||||||||
| 2020 | $ | 90,000 | $ | 90,000 | 429,115 | |||||||||
| 2021 | $ | 90,000 | $ | 17,165 | 72,835 | 356,280 | ||||||||
| 2022 | $ | 90,000 | 14,251 | 75,749 | 280,531 | |||||||||
| 2023 | $ | 90,000 | 11,221 | 78,779 | 201,752 | |||||||||
| 2024 | $ | 90,000 | 8,070 | 81,930 | 119,822 | |||||||||
| 2025 | $ | 90,000 | 4,793 | 85,207 | 34,615 | |||||||||
| 2026 | $ | 36,000 | 1,385 | 34,615 | 0 | |||||||||
What is the amount of residual value guaranteed by Reagan to the lessor?
a-1385
b-34615
c-36000
d-cannot be determined from given info
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
Financial Accounting For Decision Makers
Authors: Dr Peter Atrill, Eddie Mclaney, Sin Autor
5th Edition
1405888210, 9781405888219
