4 Refer to the following lease amortization schedule. The 10 payments are made a
ID: 2338594 • Letter: 4
Question
4 Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic afe of t2 years. The lease is 65,370 55,370 51.461 47,122 42,305 36,959 1,024 24,437 17, 125 1 10,000 10,000 10,000 3,909 4,339 6,091 S, 661 5,183 ,654 4,065 3,413 2.688 3 10,000 10,000 0,000 10,000 10.000 10,000 5, 346 ,935 6,587 7,312 wet istie enecive arenal interest rate? mund final-swer to the neares1 whele percentage Muitiple Choice , .ED m option command option commandExplanation / Answer
Using Logic
Interest expense for second year calculated based in outstanding balance at year 1.
Interest expense for second year
6091
Outstanding balance at end of first year
55370
Effective interest rate
11%
Using Microsoft excel
Effective annual interest rate
11%
Remark
RATE(10,-10000,65370,0,1)
Payment
Cash payment
Effective interest (previous year's outstanding balance* 11%)
Decrease in balance (cash payment - effective interest )
Outstanding balance (previous year's outstanding balance - decrease in balance )
0
65370
1
10000
0
10000
55370
2
10000
6091
3909
51461
3
10000
5661
4339
47122
4
10000
5183
4817
42305
5
10000
4654
5346
36959
6
10000
4065
5935
31025
7
10000
3413
6587
24437
8
10000
2688
7312
17125
9
10000
1884
8116
9009
10
10000
991
9009
0
Using Logic
Interest expense for second year calculated based in outstanding balance at year 1.
Interest expense for second year
6091
Outstanding balance at end of first year
55370
Effective interest rate
11%
Using Microsoft excel
Effective annual interest rate
11%
Remark
RATE(10,-10000,65370,0,1)
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