XYZ agreed to lease an industrial machine that cost $108,000 to RST for six years.The lease was a direct financing lease and a 12 percent interest rate was used to calculate the annual lease payments,which were payable at the end of each year.The amount of each annual rental was:

Question

Quizplus · Accepted Answer

The annual lease payment can be calculated using the formula for an annuity: Payment = (Cost * Interest Rate) / (1 - (1 + Interest Rate)^-Number of Periods). Plugging in the values: Payment = ($108,000 * 0.12) / (1 - (1 + 0.12)^-6) = $26,268.

XYZ Agreed to Lease an Industrial Machine That Cost $108,000