Here are the terms of a lease agreement: Fair value of leased asset $150,000 Lease term 4
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Question:
Here are the terms of a lease agreement:
Fair value of leased asset $150,000
Lease term 4 years
Payment frequency annual
Payment timing end of year
Guaranteed residual value $30,000
Interest rate implicit in the lease (known to lessee) 9%
Lessee's incremental borrowing rate 7%
Required:
a. Determine the amount of lease payment that the lessor would require to lease the asset.
b. Compute the present value of minimum lease payments for the lessee
c. Compute the present value of minimum lease payments for the lessor.
d. Evaluate whether the lessee should classify the lease as operating or finance.
Related Book For
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas
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