Fisher Company leased equipment from Orkney Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $26,269 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $115,000 to produce.
Required:
Round your answers to the nearest whole dollar amounts.
1. Determine the price at which the lessor is "selling" the asset (present value of the lease payments).
2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31? (Ignore taxes.)

Question

Quizplus · Accepted Answer

The Answer of Fisher Company leased equipment from Orkney Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $26,269 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $115,000 to produce.
Required:
Round your answers to the nearest whole dollar amounts.
1. Determine the price at which the lessor is "selling" the asset (present value of the lease payments).
2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31? (Ignore taxes.)

Fisher Company Leased Equipment from Orkney Industries