Calculation of lease amounts for lessor for Manufacturer/Dealer leases with guaranteed residual amount.
Cow Co. is a farming equipment dealer who reports using IFRS. It plans to lease a piece of farming equipment to Horse Inc. and wants to earn a profit on the equipment as well as earn interest. The details of the lease are as follows:
-It will be a 5 year lease and will have annual rental payments due at the beginning of the year.
-The rate of return Cow Co. wants to earn on the equipment is 7%.
-The estimated residual value (guaranteed) is $ 10,000 (the present value of which is $ 7,130).
-The annual lease payments are $ 55,359 (the present value of which is $ 242,870); and
-The leased equipment has an $ 200,000 cost to the dealer, Cow Co.
Instructions
Calculate the gross investment, unearned interest income, sales revenue, cost of goods sold and gross profit for Cow Co.

Question

Quizplus · Accepted Answer

The Answer of Calculation of lease amounts for lessor for Manufacturer/Dealer leases with guaranteed residual amount.
Cow Co. is a farming equipment dealer who reports using IFRS. It plans to lease a piece of farming equipment to Horse Inc. and wants to earn a profit on the equipment as well as earn interest. The details of the lease are as follows:
-It will be a 5 year lease and will have annual rental payments due at the beginning of the year.
-The rate of return Cow Co. wants to earn on the equipment is 7%.
-The estimated residual value (guaranteed) is $ 10,000 (the present value of which is $ 7,130).
-The annual lease payments are $ 55,359 (the present value of which is $ 242,870); and
-The leased equipment has an $ 200,000 cost to the dealer, Cow Co.
Instructions
Calculate the gross investment, unearned interest income, sales revenue, cost of goods sold and gross profit for Cow Co.

Calculation of Lease Amounts for Lessor for Manufacturer/Dealer Leases with Guaranteed