Question

On January 1, 2021, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: (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.)

Jan. 1	Payments		Effective Interest		Decrease in Balance		Outstanding Balance
2021							142,209
2021	11,000				11,000		131,209
2022	11,000		7,873		3,127		128,082
2023	11,000		7,685		3,315		124,767
2024	11,000		7,486		3,514		121,253
2025	11,000		7,275		3,725		117,528
2026	11,000		7,052		3,948		113,580
—	—		—		—		—
—	—		—		—		—
—	—		—		—		—
2038	11,000		3,055		7,945		42,975
2039	11,000		2,579		8,421		34,554
2040	11,000		2,073		8,927		25,627
2041	27,165		1,538		25,627		0

Required:
1. What is the lease term in years?
2. What is the asset’s residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.)
3. What is the effective annual interest rate? (Round your percentage answer to 1 decimal place.)
4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.)
5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.)
6. What is United’s net investment at the beginning of the lease (after the first payment)? (Round your answers to nearest whole dollar.)
7. What is United’s total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.)
8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest whole dollar.)

Answer 1

Page: No Answer Lease term = 2021 - 2040 مل un қол -16% Lease form in years - 20 years Asset's presidual value expected of end the lease ferm Asset's residual value expected at the end of the lease ferm= $27, 165 3) Elfective annual interest rate $7873 Effective annual interest rate $131,209 * Total amount of lease payments for united Total amount of lease payments for united (11,000 x 20 yrs) + 07165 $247,165 Tobal amount of lease payments for NEC Total amount of lease payment for aí C = 11000 X20 $220,000 © united met en verstoments as the beginning of the Lease after the first payment

Page No@ ) united net investment at the begining of the dease $ 131,209 uu N uu шлю uu © united's total effective interest revenue orecorded over the term the lease uniteds total effective terest revenue recorded over the term the lease = 247,165 -142,209 = $ 104,956 ® the amount would will record are right of use asset at the beginning of the lease The amount would NIC record as assel at the beginning of the lease = 11000 x 67 = 11000 x 11.46992 right of USE 1-(1+67)? $126,169