Problem 21-06 (Part Level Submission) Sandhill Leasing Company agrees to lease equipment to Teal Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Teal estimates that the expected residual value at the end of the lease term will be 60,000. Teal amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Sandhill desires a 10% rate of return on its investments. Teal's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (b) Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment 129445 SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT (C) * Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments 724000 (c) x Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calc Present value of minimum lease payments 707856 CUTT couTC (C) x Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calcu Present value of minimum lease payments 705966 SHOW LIST OF ACCOUNTS Problem 21-06 (Part Level Submission) Sandhill Leasing Company agrees to lease equipment to Teal Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Teal estimates that the expected residual value at the end of the lease term will be 60,000. Teal amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Sandhill desires a 10% rate of return on its investments. Teal's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (b) Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment 129445 SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT (C) * Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments 724000 (c) x Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calc Present value of minimum lease payments 707856 CUTT couTC (C) x Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. (Round present value factor calcu Present value of minimum lease payments 705966 SHOW LIST OF ACCOUNTS