At the beginning of the year, HIJ Corp. began to lease new equipment. This lease is being capitalized and its term has been set for 8 years. The rate implicit in the lease is 8.5% and thus, the original value of the capitalized lease is determined to be $712,000. If at the end of the year, the company is reporting a lease obligation of $652,000, what must be the annual total lease payments?
The correct answer is: b)
Total Lease Payment = Interest expense + Principal repayment
Step 1: Interest expense = 8.5% of 712,000 = 60,520
Step 2: Principal repayment = 712,000 - 652,000 = 60,000
Step 3: Total Lease Payment = 60,520 + 60,000 = $120,520
The correct answer is: c) Step 1: Calculate the Present Value of the lease: PMT = $12,000; N = 7; I = 7.5%*
Bond covenants can limit the amount of leases a company can have because leasing contracts are a form of debt. Taking on ...
Find out how and why lower interest rates for leasing new automobiles have helped spur more consumers to lease cars instead ...
Learn the ins and outs of net lease agreements, including the key differences between single net, double net and triple net ...
Understand how the value of the real estate involved in a triple-net lease impacts the value of the lease both positively ...
An accounting approach that identifies a company's lease obligation ...
An accounting term used to classify an asset on a company's balance ...
The lowest amount that a lessee can expect to make on a lease ...
A rental agreement that obliges the lessee (the person making ...
A common type of car lease in which the lessee returns the car ...
The right, but not the obligation, to buy a leased item at a ...