On January 1, 2014, Burke Corporation signed a 6-year noncancelable lease for a
ID: 2417885 • Letter: O
Question
On January 1, 2014, Burke Corporation signed a 6-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $9,050 at the beginning of each year, starting January 1, 2014. The machine has an estimated useful life of 7 years and a $5,410 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke’s incremental borrowing rate is 12%, and the lessor’s implicit rate is unknown.
The present value of the minimum lease payments
Explanation / Answer
Answer has been calculated as below---
Computation of present value of minimum lease payments-- $9,050 X 4.60478 * = $41,673
*Present value of an annuity due of 1 for 6 periods at 12%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.