Solution-How much of the residual value is guaranteed by

How much of the residual value is guaranteed by the lessee

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Reference no: EM131823066

Problem - On January 1, 2011, National Insulation Corporation (NIC) leased office space under a capital lease. Lease payments are made annually. Title does not transfer to the lessee and there is no bargain purchase option. Portions of the lessee's lease amortization schedule appear below:

Jan. 1	Payments	Effective Interest	Decrease in Balance	Outstanding Balance
2011				173,772
2011	18,000		18,000	155,772
2012	18,000	15,577	2,423	153,349
2013	18,000	15,335	2,665	150,684
2014	18,000	15,068	2,932	147,752
2015	18,000	14,775	3,225	144,527
2016	18,000	14,453	3,547	140,980
-	-	-	-	-
-	-	-	-	-
-	-	-	-	-
2028	18,000	6,868	11,132	57,543
2029	18,000	5,754	12,246	45,297
2030	18,000	4,530	13,470	31,827
2031	35,000	3,173	31,827	0

Required:

(1) What is NIC's lease liability at the inception of the lease (after the first payment)?

(2) What amount would NIC record as a leased asset?

(3) What is the lease term in years?

(4) What is the asset's residual value expected at the end of the lease term?

(5) How much of the residual value is guaranteed by the lessee?

(6) What is the effective annual interest rate?

(7) What is the total amount of minimum lease payments?

(8) What is the total effective interest expense recorded over the term of the lease?

Reference no: EM131823066

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How much of the residual value is guaranteed by the lessee

Reference no: EM131823066

Reference no: EM131823066

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