Initial lease liability will be :-
Year | Lease Rent ($) | Present value factor (6%) | Amount ($) |
1 | 60,800 | 1 | 60,800 |
2 | 60,800 | 0.94340 | 57,359 |
3 | 60,800 | 0.89000 | 54,112 |
4 | 60,800 | 0.83962 | 51,049 |
5 | 60,800 | 0.79209 | 48,159 |
6 | 60,800 | 0.74726 | 45,433 |
7 | 60,800 | 0.70496 | 42,862 |
8 | 60,800 | 0.66506 | 40,436 |
9 | 60,800 | 0.62741 | 38,147 |
10 | 60,800 | 0.59190 | 35,988 |
10 | 10,000 (residual value) | 0.59190 | 5,919 |
480,264 |
Initial lease liability is $480,264
Present value factor for year 1 will be 1 because hospital will pay lease rent in the beginning of year.
Expected residual value at the end of lease from the view point of lessee will be considered ($10,000)
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