Problem 21-1 Cullumber Leasing Company agrees to lease machinery to Riverbed Corporation on January 1, 2017. 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 $489,000, and the fair value of the asset on January 1, 2017, is $699,000 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $94,000. Riverbed depreciates all of its equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017 5. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. 6, Cullumber desires a 9% rate of return on its investments. Riverbed's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables 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 O decimal places e.g. 58,971.) Annual rental payment 118045 SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER Your answer is incorrect. Try again. Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Present value of minimum lease payments 680407 Problem 21-1 Cullumber Leasing Company agrees to lease machinery to Riverbed Corporation on January 1, 2017. 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 $489,000, and the fair value of the asset on January 1, 2017, is $699,000 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $94,000. Riverbed depreciates all of its equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017 5. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. 6, Cullumber desires a 9% rate of return on its investments. Riverbed's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables 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 O decimal places e.g. 58,971.) Annual rental payment 118045 SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER Your answer is incorrect. Try again. Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Present value of minimum lease payments 680407
