Exhibit 20-4 On January 1, 2014, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2014. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:
-Refer to Exhibit 20-4. The cost of the leased property to Average is (round the answer to the nearest dollar)

Question

Exhibit 20-4 On January 1, 2014, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2014. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows: 
-Refer to Exhibit 20-4. The cost of the leased property to Average is (round the answer to the nearest dollar)

Quizplus · Accepted Answer

The cost of the leased property is calculated based on the present value of the lease payments. The correct answer is $308,475, which is the present value of the lease payments rounded to the nearest dollar.

Exhibit 20-4 on January 1, 2014, Average Leasing Company Entered