Exercise 21A-2 a-c (Part Level Submission) On December 31, 2016, Kingbird Corpor

Question

Exercise 21A-2 a-c (Part Level Submission) On December 31, 2016, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $7,924 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of depreciation for all of its plant assets. Kingbird's incremental borrowing rate is 5%, and the lessor's implicit rate is unknown. Your answer is correct. What type of lease is this? This is a/an finance » J lease. Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Attempts: 2 of 3 used Compute the present value of the lease payments. (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.) Present value of the lease payments

Explanation / Answer

Requirement (b) – Present Value of the Lease Payments = $ 36,022

Present Value of the Lease Payments = Annual Lease payments x Present Value annuity due factor

= $7,924 x 4.54595*

= $ 36,022

*Present Value factor of an annuity due of $1 for 5 Years at 5% Incremental Borrowing rate

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.