Skysong Inc. wishes to lease machinery to Sheridan Company. Sheridan wants the machinery for 4 years,...
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Skysong Inc. wishes to lease machinery to Sheridan Company. Sheridan wants the machinery for 4 years, although it has a useful life of 10 years. The machinery has a fair value at the commencement of the lease of $42,000, and Skysong expects the machinery to have a residual value at the end of the lease term of $29,000. However, Sheridan does not guarantee any part of the residual value. Sheridan does expect that the residual value will be $40,000 instead of $29,000. What would be the amount of the annual rental payments Skysong demands of Sheridan, assuming each payment will be made at the end of each year and Skysong wishes to earn a rate of return on the lease of 6%? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.) Skysong Inc. wishes to lease machinery to Sheridan Company. Sheridan wants the machinery for 4 years, although it has a useful life of 10 years. The machinery has a fair value at the commencement of the lease of $42,000, and Skysong expects the machinery to have a residual value at the end of the lease term of $29,000. However, Sheridan does not guarantee any part of the residual value. Sheridan does expect that the residual value will be $40,000 instead of $29,000. What would be the amount of the annual rental payments Skysong demands of Sheridan, assuming each payment will be made at the end of each year and Skysong wishes to earn a rate of return on the lease of 6%? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.)
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To solve it we need to find the present value of the minimum lease payments MLP that Skysong expects ... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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