Exhibit 20-4
On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:

-Refer to Exhibit 20-4. What is the cost of the leased property to Average round the answer to the nearest dollar)?

Question

Exhibit 20-4
On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:
 
-Refer to Exhibit 20-4. What is the cost of the leased property to Average round the answer to the nearest dollar)?

Quizplus · Accepted Answer

The cost of the leased property is the present value of the lease payments, which is $308,475.

Exhibit 20-4 on January 1, 2016, Average Leasing Company Entered into a into a Direct