On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease....

 

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On January 1, 2024, Majestic Mantles leased a lathe from Equipment 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 Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below. Effective Interest Outstanding Balance $291,599 January 1 Payments Decrease in Balance 2024 $ 27,500 $ 27,500 $ 264,099 2025 $ 27,500 $ 21,128 $ 6,372 $ 257,727 2026 $ 27,500 $ 20,618 $ 6,882 $ 2027 $ 27,500 $ 20,068 $ 7,432 2828 $ 27,500 $ 19,473 $ 8,027 2029 $ 27,500 $ 18,831 $ 8,669 250,845 $ 243,413 $ 235,386 $226,717 2030 $ 27,500 $ 18,137 $ 9,363 $ 217,354 2041 $ 27,500 $ 5,670 2042 2043 $ 27,500 $ 27,500 $ 3,923 $ 2,037 $ 21,830 $ 23,577 $ 25,463 $ 49,040 $ 25,463 Required: 1. What is Majestic's lease liability at the beginning of the lease (after the first payment)? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? Note: Round your percentage answer to 1 decimal place. 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease? 1. Lease liability 2. Right-of-use asset 3. Lease term 4. Effective annual interest rate 19 years 8.0 % 5. Total of lease payments $ 522,500 6. Total effective interest expense On January 1, 2024, Majestic Mantles leased a lathe from Equipment 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 Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below. Effective Interest Outstanding Balance $291,599 January 1 Payments Decrease in Balance 2024 $ 27,500 $ 27,500 $ 264,099 2025 $ 27,500 $ 21,128 $ 6,372 $ 257,727 2026 $ 27,500 $ 20,618 $ 6,882 $ 2027 $ 27,500 $ 20,068 $ 7,432 2828 $ 27,500 $ 19,473 $ 8,027 2029 $ 27,500 $ 18,831 $ 8,669 250,845 $ 243,413 $ 235,386 $226,717 2030 $ 27,500 $ 18,137 $ 9,363 $ 217,354 2041 $ 27,500 $ 5,670 2042 2043 $ 27,500 $ 27,500 $ 3,923 $ 2,037 $ 21,830 $ 23,577 $ 25,463 $ 49,040 $ 25,463 Required: 1. What is Majestic's lease liability at the beginning of the lease (after the first payment)? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? Note: Round your percentage answer to 1 decimal place. 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease? 1. Lease liability 2. Right-of-use asset 3. Lease term 4. Effective annual interest rate 19 years 8.0 % 5. Total of lease payments $ 522,500 6. Total effective interest expense

Answer rating: 100% (QA)

Lease Liability The lease liability at the beginning of the lease after the first payment is the outstanding balance after the first payment Lease lia... View the full answer