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A lease agreement that qualifies as a finance lease calls for annual lease payments of $24,000...

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Accounting

A lease agreement that qualifies as a finance lease calls forannual lease payments of $24,000 over a four-year lease term (alsothe asset’s useful life), with the first payment at January 1, thebeginning of the lease. The interest rate is 5%. (FV of $1, PV of$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Useappropriate factor(s) from the tables provided.)

Required:
a. Determine the present value of the lease uponthe lease's inception.
b. Create a partial amortization through the firstpayment on January 1, 2017.
c. If the lessee’s fiscal year is the calendaryear, what would be the pretax amounts related to the lease thatthe lessee would report in its income statement for the first yearended December 31?

Answer & Explanation Solved by verified expert
4.4 Ratings (989 Votes)
a Computation of present value of lease upon leases inception Lease payment 24000 Interest rate 5 Number of yesrs 4 year No of lease payments Year Value Flows    See Answer
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A lease agreement that qualifies as a finance lease calls forannual lease payments of $24,000 over a four-year lease term (alsothe asset’s useful life), with the first payment at January 1, thebeginning of the lease. The interest rate is 5%. (FV of $1, PV of$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Useappropriate factor(s) from the tables provided.)Required:a. Determine the present value of the lease uponthe lease's inception.b. Create a partial amortization through the firstpayment on January 1, 2017.c. If the lessee’s fiscal year is the calendaryear, what would be the pretax amounts related to the lease thatthe lessee would report in its income statement for the first yearended December 31?

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