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Determine the present value of the lease payments

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Question - On 1 July 2020, Amy Ltd leased a processing plant to Kent Ltd. The plant was purchased by Amy Ltd on 1 July 2020 for its fair value of $512,122. The lease agreement contained the following provisions:

Lease term - 3 Years

The economic life of the plant - 5 Years

Annual rental payment, In arrears (Commencing 30/06/2021) - $200,000

Residual value at the end of the lease term - $100,000

Residual value guaranteed by the lessee - $60,000

The interest rate implicit in the lease - 10%

Annuity factor @ 10% , after the 3 years - 2.4869

Discounting factor of $1, after 3 years - 0.7513

Required - Determine the present value of the lease payments from the perspective of Kent Ltd?

Reference no: EM132621750

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