Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

-What is the outstanding balance after payment 9?
A) $8,929.
B) $13,463.
C) $5,000.
D) $5,537.

Question

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.
 
-What is the outstanding balance after payment 9?
A) $8,929. 
B) $13,463. 
C) $5,000. 
D) $5,537.

Quizplus · Accepted Answer

Step 1 Interest = 12% × $16,901 = $2,028
Step 2 Decrease in balance = $10,000 ? 2,028 = $7,972
Step 3 Ending balance = $16,901 ? 7,972 = $8,929

Refer to the Following Lease Amortization Schedule