Exhibit 21-4 On January 1, 2010, General Leasing Company entered into a direct financing lease with a lessee, Lee Company.The lease agreement calls for five equal annual payments of $60, 000 at the beginning of each year with the first payment due on January 1, 2010.The leased property has an estimated residual value of $10, 000, which Lee does not guarantee.The property remains the property of General at the end of the lease term.General desires a 12% rate of return.Present value factors for a 12% interest rate are as follows:
$\begin{array}{llr}
\text { Present value of $ \$ 1 $ for $ n=1 $} &0.892857\
\text { Present value of $ \$ 1 $ for $ n=5 $ } &0.567427\
\text { Present value of an ordinary annuity for $ n=5 $ } &3.604776\
\text { Present value of an annuity due for $ n=5 $ } &4.037349\

\end{array}$

- Refer to Exhibit 21-4.The cost of the leased property to General is (round the answer to the nearest dollar)

Question

Exhibit 21-4 On January 1, 2010, General Leasing Company entered into a direct financing lease with a lessee, Lee Company.The lease agreement calls for five equal annual payments of $60, 000 at the beginning of each year with the first payment due on January 1, 2010.The leased property has an estimated residual value of $10, 000, which Lee does not guarantee.The property remains the property of General at the end of the lease term.General desires a 12% rate of return.Present value factors for a 12% interest rate are as follows:
$\begin{array}{llr}
  \text {  Present value of \( \$ 1 $ for $ n=1 $} &0.892857\
 \text { Present value of $ \$ 1 $ for $ n=5 $ } &0.567427\
 \text { Present value of an ordinary annuity for $ n=5 $ } &3.604776\
 \text { Present value of an annuity due for $ n=5 $ } &4.037349\

\end{array}\)

- Refer to Exhibit 21-4.The cost of the leased property to General is (round the answer to the nearest dollar)

Quizplus · Accepted Answer

The cost of the leased property is calculated using the present value of an annuity due for the lease payments and the present value of the residual value. The present value of the lease payments is $60,000 * 4.037349 = $242,241. The present value of the residual value is $10,000 * 0.567427 = $5,674. Adding these gives $242,241 + $5,674 = $247,915.

Exhibit 21-4 on January 1, 2010, General Leasing Company Entered