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On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert
On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $710,000 and has an expected useful life of seven years. Its normal sales price is $710,000. The residual value after five years is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 6%. Calculate the amount of the annual lease payments. Note: Use tables, Excel, or a financial calculator. Enter amounts as positive values rounded to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Table or calculator function: Amount to be recovered (fair value) Present value of the residual value Residual Value Amount to be recovered through periodic lease payments Lease Payment Table or calculator function: Amount of each annual lease payment. n = = Present value n = Lease Payments 13
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