Soundesign Company entered into a lease of special equipment to LabCorp Company.The lease term was six years.The equipment cost Soundesign $40,000 and Soundesign plans to earn a $4,000 dealer profit.Soundesign's implicit rate on the lease is 12 percent. As a result of this agreement,Soundesign will receive year-end lease payments of

Question

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The lease payments are calculated using the implicit rate of 12% to cover the cost of the equipment ($40,000) plus the dealer profit ($4,000) over the six-year lease term. The correct annual lease payment is $10,702.

Soundesign Company Entered into a Lease of Special Equipment to LabCorp