Question

Chapter 15 - Homework A Saved 17 On January 1, 2021, Majestic Mantles leased a lathe from Equipment 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 Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: 0.65 points Jan. 1 Payments 2021 2022 2023 2024 2025 2026 2027 eBook Effective Decrease in Outstanding Interest Balance Balance 270, 392 25,500 244,892 19,591 5,909 238,983 19, 119 6,381 232,602 18,608 6,892 225, 710 18,057 7,443 218,267 17, 461 210, 228 16,818 8, 682 201,547 25,500 25,500 25,500 25,500 25,500 25,500 25,500 8,039 Print o References 2038 2039 2040 25,500 25,500 5,257 3,638 1,889 20,243 21,862 23,611 45,474 23, 612 0 25,500 Required: 1. What is Majestic's lease liability after the first lease payment?? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease? $ 270,392 20 years 1. Lease liability 2. Right-of-use asset 3. Lease term 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense 8.01%

Answer 1

Solution:

244892 270392 20 1. Lease Liability after first lease payment 2. Right to use Asset 3. Lease term in Years 4. Effective Annual Interest = 19591/244892 5. Total Lease Payments 25500*20 6. Total Effective Interest (510000-270392) 8.0% 510000 239608

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