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Determine the present value of the annual lease payments

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Reference no: EM132466197

Consider the following lease characteristics:

Lease term                                                   4 years

Asset's useful life                                          6 years

Asset's fair value                                          $40,000

Annual lease payment                                   $9,000

Annual lease payments occur at: Beginning of year

Lessor's implicit rate (known by lessee)            5%

Bargain purchase option exists?                     No

Question 1) Determine the present value of the annual lease payments. (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. Round present value to the nearest whole dollar.)

Question 2) Determine the appropriate lease classification by the lessee (operating or finance).

Reference no: EM132466197

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