PROBLEM: Front Street Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. On September 30, 2013, the company leased a delivery truck to a local florist, Anything Grows.

The lease agreement specified quarterly payments of $3,000 beginning September 30, 2013, the inception of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2016 (three-year lease term). The florist had the option to purchase the truck on September 29, 2015, for $6,000 when it was expected to have a residual value of $10,000. The estimated useful life of the truck is four years. Front Street Auto Leasing