Business, 08.09.2021 20:10 riley01weaver1
On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:
Present value of $1 for n = 1 0.892857
Present value of $1 for n = 5 0.567427
Present value of an ordinary annuity for n = 5 3.604776
Present value of an annuity due for n = 5 4.037349
What is the amount of interest revenue that Average should recognize on the lease for the year ended December 31, 2016 (round the answer to the nearest dollar)?
a. $36,336
b. $37,017
c. $27,336
d. $28,017
Answers: 1
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On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Len...
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