80.2K

Verified Solution

Link Copied!

On January $1,2023,$ Carla Vista Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $$426,000$ and Carla Vista purchased it from Manufacturing Solutions Ltd$.$ specifically for Rock River. Annual payments are made each January $1$ by Rock River. In addition to making the lease payment, Rock River also reimburses Carla Vista $$4,700$ each January $1$ for a portion of the repairs and maintenance expenditures, which cost Carla Vista a total of $$6,300$ per year. At the end of the five$-$year agreement, the compression equipment will revert to Carla Vista and is expected to have a residual value of $$27,200,$ which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Carla Vista.

Click here to view the factor table PRESENT VALUE OF $1.$

Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

$($a$)$

Your answer is incorrect.

Assume that Carla Vista has a required rate of return of $9\%.$ Calculate the amount of the lease payments that would be needed to generate this return on the agreement if payments were made each: $($Round factor values to $5$ decimal places, e$.$g$.1\mathrm{.}25124$ and final answers to $2$ decimal places, e$.$g$.5,275.)$

January $1$

December $31$

The lease payments

$

Answer & Explanation Solved by verified expert

See Answer