A lease agreement that qualifies as a finance lease calls forannual lease payments of $20,000 over a eight-year lease term (alsothe asset’s useful life), with the first payment at January 1,2016, the beginning of the lease. The interest rate is 4%. Thelessor’s fiscal year is the calendar year. The lessor manufacturedthis asset at a cost of $128,000. (FV of $1, PV of $1, FVA of $1,PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s)from the tables provided.) Required: a. Determine the price atwhich the lessor is “selling” the asset (present value of the leasepayments). b. Create a partial amortization schedule through thesecond payment on January 1, 2017. c. What would be the amountsrelated to the lease that the lessor would report in its incomestatement for the year ended December 31, 2017 (ignore taxes)?
