Sheffield Corporation manufactures specialty equipment with an estimated economic life of 12 years and leases it to MartinezAirlines Corp. for a period of 10 years. Both Sheffield and Martinez Airlines follow ASPE. The equipments normal selling price is $199,227 and its unguaranteed residual value at the end of the lease term is estimated to be $14,800. Martinez Airlines will make annual payments of $25,500 at the beginning of each year and pay for all maintenance and insurance. Sheffield incurred costs of $104,000 in manufacturing the equipment and $6,900 in negotiating and closing the lease. Sheffield has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 10%.

1. Using tables, a financial calculator, or Excel functions, calculate the PV of the lease payments and unguaranteed residual value under the lease. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

2. Describe the nature of the lease. (sales type or manufacturer or dealer lease) to Sheffield Corporation.

3. Calculate the amount of each of the following items: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

1.		Gross investment		$
2.		Unearned interest income		$
3.		Sale price		$
4.		Cost of goods sold		$

4. Prepare a 10-year lease amortization schedule for the lease obligation using Excel (lessor amortization table). (Round answers to 0 decimal places, e.g. 5,275.)