Calculate the amount of the annual lease payments

Assignment Help Accounting Basics

Reference no: EM131881452

Problem

On January 1, James Industries leased equipment to a customer for a four-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $800,000 and has an expected useful life of six years. Its normal sales price is $800,000. The residual value after four years, guaranteed by the lessee, is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. Collectibility of the remaining lease payments is reasonably assured, and there are no material cost uncertainties. The interest rate is 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Calculate the amount of the annual lease payments.

Reference no: EM131881452

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