Question
Pronghorn Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10
Pronghorn Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $280,968, and its unguaranteed residual value at the end of the lease term is estimated to be $19,300. National will pay annual payments of $39,000 at the beginning of each year. Pronghorn incurred costs of $197,000 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Pronghorn has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 9%.
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