Question: (a) Computation of annual payments Cost (fair value) of leased asset to lessor Less: Present value of salvage value (residual value in this case)

(a) Computation of annual payments Cost (fair value) of leased asset to

(a) Computation of annual payments Cost (fair value) of leased asset to lessor Less: Present value of salvage value (residual value in this case) $140,700 $15,480 x 0.85734 (Present value of 1 at 8% for 2 periods) 13,272 Amount to be recovered through lease payments Two periodic lease payments $127,428 + 1.78326 $127,428 $71,458

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