Question
SNHU ACC 309 Module 5 Chapter 20: Problem Statement:Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016.
SNHU ACC 309 Module 5 Chapter 20:
Problem Statement:Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016. The lease terms, provisions, and related events are as follows:
The lease is noncancelable and has a term of 8 years.
The annual rentals are $32,000, payable at the end of each year.
Tilson agrees to pay all executory costs.
The interest rate implicit in the lease is 14%.
The cost of the equipment to the lessor is $110,000.
The lessor incurs no material initial direct costs.
The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.
The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years.
I understand the analysis of this question until the very end. On the last part of the analysis is the Balance Sheet. Under Current Assets: Net investment in Sales-Type Leases for 2016 is $28,07.18. How is this calculated? Lease Payments are $32,000 discounted to the balance sheet. I don't understand how it is discounted.
Net Investment for Dec 31, 2016 was $145,218.51.
Lease Payments are $32,000 ??> = 3,929.82 discounted to Dec 31, 2016
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