On January 1, 2018, Tennessee Valley Corporation (TVC) leased equipment from Great Lakes Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by TVC. Portions of the Great Lakes Leasing's lease amortization schedule appear below:

Required:
1. What is TVC's lease payable at the beginning of the lease (after the first payment)?
2. What is the lease term in years?
3. What is the asset's residual value expected at the end of the lease term?
4. What is the effective annual interest rate?
5. What is the total amount of lease payments for Great Lakes?
6. What is the total amount of lease payments for TVC?
7. What is Great Lakes' total effective interest revenue recorded over the term of the lease?
8. What amount would TVC record as a right-of-use asset at the beginning of the lease?

Question

On January 1, 2018, Tennessee Valley Corporation (TVC) leased equipment from Great Lakes Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by TVC. Portions of the Great Lakes Leasing's lease amortization schedule appear below:

Required:
1. What is TVC's lease payable at the beginning of the lease (after the first payment)?
2. What is the lease term in years?
3. What is the asset's residual value expected at the end of the lease term?
4. What is the effective annual interest rate?
5. What is the total amount of lease payments for Great Lakes?
6. What is the total amount of lease payments for TVC?
7. What is Great Lakes' total effective interest revenue recorded over the term of the lease?
8. What amount would TVC record as a right-of-use asset at the beginning of the lease?

Quizplus · Accepted Answer

The Answer of On January 1, 2018, Tennessee Valley Corporation (TVC) leased equipment from Great Lakes Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by TVC. Portions of the Great Lakes Leasing's lease amortization schedule appear below:

Required:
1. What is TVC's lease payable at the beginning of the lease (after the first payment)?
2. What is the lease term in years?
3. What is the asset's residual value expected at the end of the lease term?
4. What is the effective annual interest rate?
5. What is the total amount of lease payments for Great Lakes?
6. What is the total amount of lease payments for TVC?
7. What is Great Lakes' total effective interest revenue recorded over the term of the lease?
8. What amount would TVC record as a right-of-use asset at the beginning of the lease?

On January 1, 2018, Tennessee Valley Corporation (TVC) Leased Equipment