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Compute the PV of the lease payment by company Z

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Question - On 1 July 2018, Company Z leased a vehicle from Company W. The vehicle cost W $22,065.3, considered to be its fair value on that same day. The finance lease agreement contained the following provisions:

-The lease term is 2 years, starting on 1 July 2018.

-Annual lease Payment, payable on 30 June each year is $7,000.

-Estimated useful life the Vehicle is 5 years.

-Estimated Residual Value of the vehicle at the end of the lease is $12,000.

-Residual Value Guaranteed by Company Z is 9,000.

-Interest rate implicit in the lease is 10%.

-Present value of an annuity: PVIFA (T2, 10%, 2Y) = 1.7355.

-Present value of $1: PVIF (T1, 10%, 2Y) = 0.8264.

Required - Compute the PV of the lease payment by company Z (lessee) at 1 July 2018?

Reference no: EM132845297

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