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.) Payments Jan. 1 2021 2021 2022 2023 2024 2025 2026 27,000 27,000 27,000 27,000 27,000 27,000 Effective Decrease in Outstanding Interest Balance Balance 244,813 27,000 217,813 23,959 3,041 214,772 23,625 3,375 211,397 23,254 3,746 207,651 22,842 4,158 203,493 22,384 4,616 198,877 2038 2039 2040 2041 27,000 27,000 27,000 49,600 10,852 9,076 7,104 4,915 16,148 17,924 19,896 44,685 82,505 64,581 44,685 o 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

Solution :-

answes 20 years 1.) Lease term is from year Dole to year Qoze nt that is 2030. 2016 : Hence the Lease term is 20 years equal to 2.) Assets residual value is Value remaining at the end of 야 lease team Cyear ended 3.38) le s 49600 3. effective annual raterest rate effective hit test for 2018 outstanding balance at end of 201e $ 23959/8 217913 4.) Amount of lease payments for united - (Amual lease payment & Lease term) t expected residual value $27000 x 20 + $49000 & S 40,000+ 8 49600 = $589,600 5.) Amount of lease payments for Nic. Annual lease payment & Lease term 27000 + 20 is s. hovou

6.) Uniteds Net Investment at begining of Lease $_217813 (8246813- $27000) 7) Total effective interest revenue : Amount of lease payments - outstanding balance of & Seaboo 7244013 & 344767 lease Z 6.) Use کر right of asset 24२००१.85 27000 + $ 27000 x 7.963326) $ 27000 + 521 5oog. esa use asse: Begining lease payment + Cannual lease payment & PVAF di 20 yos?) Right of Thank you hope understand please be comment if have doubt ini)

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