On January 1, 2016, the WXYZ Company leases a fleet of delivery vehicles from Solt Motors, Inc

When there was no guaranteed residual value under the terms of the lease, the annual payments required were $60,000 on January 1 of each year, beginning on January 1, 2016, over a four-year term. Now assume that there is a guaranteed residual value of $14,000 specified in the contract. The delivery vehicles have a useful life of eight years and WXYZ depreciates similar vehicles owned using the straight-line method. WXYZ's incremental borrowing rate is 9% and the 7% implicit rate in the lease is known to the lessee. The vehicles cost Solt Motors $200,000 and have a fair value of $217,459. Solt has no uncertainties as to future costs and collection. The lease terms do not contain a transfer of ownership and there is no bargain purchase option. Assume that there are no executory costs related to the lease agreement.

Requirement (a): Compute the annual payment needed to ensure that the lessor company recovers the fair value of the vehicles: $

Requirement (b) Compute the PV of the minimum lease payments using this new payment.

*The present value of the guaranteed residual value is $

*The present value of the payment determined in Requirement a is: $

* Determine the present value of the minimum lease

Requirement (c): Prepare the amortization table required for the netire term

Date Payment Interest b=prior period bal. x 7% Principal c=a-b Balance d= prior per bal - c

1/1/16 Balance $217,459

1/1/16

1/1/17

1/1/18

1/1/19

12/31/19