On January 1, James Industries leased equipment to a customer for a five-year period, at which time
Question:
On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $750,000 and has an expected useful life of seven years. Its normal sales price is $750,000. The residual value after five years is $150,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 6%.
Calculate the amount of the annual lease payments.
Note: Use tables, Excel, or a financial calculator. Enter amounts as positive values rounded to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson