Reference no: EM132545365
Question - Indigo Leasing Company agrees to lease equipment to Sweet Corporation on January 1, 2020. The following information relates to the lease agreement.
1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2. The cost of the machinery is $523,000, and the fair value of the asset on January 1, 2020, is $758,000.
3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Sweet estimates that the expected residual value at the end of the lease term will be 60,000. Sweet amortizes all of its leased equipment on a straight-line basis.
4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5. The collectibility of the lease payments is probable.6.Indigo desires a 10% rate of return on its investments. Sweet's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
Required - Calculate the amount of the annual rental payment.
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: Indigo Leasing Company agrees to lease equipment to Sweet Corporation on January 1, 2020. Calculate the amount of the annual rental payment
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