Lessee, Inc., acquired the use of a machine by agreeing to pay the manufacturer of the machine $20,000 per year for 5 years.At the time the lease was signed, the interest rate for a 5-year loan was 8%.
Required:
(a.)Use the appropriate factor from Table 6-5 to calculate the amount that Lessee, Inc.could have paid at the beginning of the lease to buy the machine outright.
(b.)What causes the difference between the amount you calculated in part (a.)and the total of $100,000 ($20,000 per year for 5 years)that Lessee, Inc.will pay under the terms of the lease?
(c.)What is the appropriate amount of cost to be reported in Lessee, Inc's balance sheet (at the time the lease was signed)with respect to this asset?

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The Answer of Lessee, Inc., acquired the use of a machine by agreeing to pay the manufacturer of the machine $20,000 per year for 5 years.At the time the lease was signed, the interest rate for a 5-year loan was 8%.
Required:
(a.)Use the appropriate factor from Table 6-5 to calculate the amount that Lessee, Inc.could have paid at the beginning of the lease to buy the machine outright.
(b.)What causes the difference between the amount you calculated in part (a.)and the total of $100,000 ($20,000 per year for 5 years)that Lessee, Inc.will pay under the terms of the lease?
(c.)What is the appropriate amount of cost to be reported in Lessee, Inc's balance sheet (at the time the lease was signed)with respect to this asset?