On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing's lease amortization schedule appear below:

Required:
1. What is the lease term in years?
2. What is the asset's residual value expected at the end of the lease term?
3. What is the effective annual interest rate?
4. What is the total amount of lease payments for United?
5. What is the total amount of lease payments for NIC?
6. What is United's net investment at the beginning of the lease (after the first payment)?
7. What is United's total effective interest revenue recorded over the term of the lease?
8. What amount would NIC record as a right-of-use asset at the beginning of the lease?

Transcribed Image Text:

Decrease Jan. Payments Effectlve Interest In Balance 16.673 16.340 0