Problem 15-7 Lease amortization schedule [LO15-2, 15-6] On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing's lease amortization schedule appear below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Jan. 1 Payments Interest Effective Decrease in Outstanding Balance Balance 2018 2018 2019 2020 2021 2022 2023 24,000 24,000 24,000 24,000 24,000 24,000 19,767 19,386 18,971 18,518 18,025 24,000 4,233 4,614 5,029 5,482 5,975 243,635 219,635 215,402 210,788 205,759 200,277 194,302 2035 2036 2037 2038 24,000 24,000 24,000 27,080 7,194 5,682 4,033 2,236 16,806 18,318 19,967 24,844 63,129 44,811 24,844 Required: 1. What is the lease term in years? 2. What is the asset's residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.) 3. What is the effective annual interest rate? (Round your percentage answer to 1 decimal place.) 4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.) 5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.) 6. What is United's net investment at the beginning of the lease (after the first payment)? (Round your answers to nearest whole dollar.) 7. What is United's total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.) 8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest whole dollar.) 1. Lease term 2. Asset's residual value 3. Effective annual interest rate 4. Lease payments for United 5. Lease payments for NIC 6. Net investment 7. Total effective interest revenue 8. Right-of-use asset years Problem 15-7 Lease amortization schedule [LO15-2, 15-6] On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing's lease amortization schedule appear below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Jan. 1 Payments Interest Effective Decrease in Outstanding Balance Balance 2018 2018 2019 2020 2021 2022 2023 24,000 24,000 24,000 24,000 24,000 24,000 19,767 19,386 18,971 18,518 18,025 24,000 4,233 4,614 5,029 5,482 5,975 243,635 219,635 215,402 210,788 205,759 200,277 194,302 2035 2036 2037 2038 24,000 24,000 24,000 27,080 7,194 5,682 4,033 2,236 16,806 18,318 19,967 24,844 63,129 44,811 24,844 Required: 1. What is the lease term in years? 2. What is the asset's residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.) 3. What is the effective annual interest rate? (Round your percentage answer to 1 decimal place.) 4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.) 5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.) 6. What is United's net investment at the beginning of the lease (after the first payment)? (Round your answers to nearest whole dollar.) 7. What is United's total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.) 8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest whole dollar.) 1. Lease term 2. Asset's residual value 3. Effective annual interest rate 4. Lease payments for United 5. Lease payments for NIC 6. Net investment 7. Total effective interest revenue 8. Right-of-use asset years
