Tempe Corp. leased some equipment to Glendale, Inc. on January 1, 2010. The leas

Question

Tempe Corp. leased some equipment to Glendale, Inc. on January 1, 2010. The lease required six annual payments, with the first payment due on December 31, 2010. The cost, and also fair value, of the equipment was $140,000, and there was no estimated residual value at the end of the six-year period. The lease was a direct financing lease and does qualify as a capital lease for Tempe. Tempe's desired rate of return is 9%. Use the following factors for 6 periods:                                                                                                                

Present value of an ordinary annuity     4.485919 [9%]

Present value of annuity due                   4.889651 [9%]

Required:                 Compute the annual payment

Explanation / Answer

Present value of annual payment = 140,000

140,000 = Annual payment* (1-1/1.09^6)/9%= Annual payment*4.485919

Annual payment = 31208.77

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

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