The inception of a lease is 1/1/x1.A third party guarantees the residual value of the asset under lease, estimated to be $12,000 at 1/1/x6, the end of the lease term.Annual lease payments are $10,000 due each December 31 beginning 12/31/x1.The last payment is due 12/31/x5.Both the lessor and lessee use 10% as the interest rate.The remaining useful life of the asset was 6 years at inception.What is the net asset balance for the lesso and net liability balance for the lessee, at inception (rounded to the nearest dollar)?
A)Choice 1
B)Choice 2
C)Choice 3
D)Choice 4
E)Choice 5

Question

The inception of a lease is 1/1/x1.A third party guarantees the residual value of the asset under lease, estimated to be $12,000 at 1/1/x6, the end of the lease term.Annual lease payments are $10,000 due each December 31 beginning 12/31/x1.The last payment is due 12/31/x5.Both the lessor and lessee use 10% as the interest rate.The remaining useful life of the asset was 6 years at inception.What is the net asset balance for the lesso and net liability balance for the lessee, at inception (rounded to the nearest dollar)? 
A)Choice 1 
B)Choice 2 
C)Choice 3 
D)Choice 4 
E)Choice 5

Quizplus · Accepted Answer

The Answer of The inception of a lease is 1/1/x1.A third party guarantees the residual value of the asset under lease, estimated to be $12,000 at 1/1/x6, the end of the lease term.Annual lease payments are $10,000 due each December 31 beginning 12/31/x1.The last payment is due 12/31/x5.Both the lessor and lessee use 10% as the interest rate.The remaining useful life of the asset was 6 years at inception.What is the net asset balance for the lesso and net liability balance for the lessee, at inception (rounded to the nearest dollar)? 
A)Choice 1 
B)Choice 2 
C)Choice 3 
D)Choice 4 
E)Choice 5

The Inception of a Lease Is 1/1/x1