Use the present value and future value tables included in Appendix 8 and on the textbook companion website.
-On January 1, Cromwell Corp. leased a mainframe computer from Fairview Company for $42,000 per year (payable on each December 31) for 10 years. The lease is a capital lease, and the current market rate of interest is 12 percent. The market value of the computer is $237,300, which is equal to its discounted present value at 12 percent. Given this data, the amount of the lease obligation at the end of the first year is

Question

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-On January 1, Cromwell Corp. leased a mainframe computer from Fairview Company for $42,000 per year (payable on each December 31) for 10 years. The lease is a capital lease, and the current market rate of interest is 12 percent. The market value of the computer is $237,300, which is equal to its discounted present value at 12 percent. Given this data, the amount of the lease obligation at the end of the first year is

Quizplus · Accepted Answer

The lease obligation at the end of the first year is the present value of the remaining lease payments. The initial lease obligation is $237,300, which is the present value of all lease payments. After the first payment of $42,000, the remaining obligation is the present value of the remaining 9 payments, which is $223,776.

Use the Present Value and Future Value Tables Included in Appendix