What is Northern implicit rate for the lease

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Question - Northern Equipment leases cooling towers to Warmup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $180,000. The cost of the equipment to Northern is $170,000 and the expected life of the testing equipment is 8 years. At the end of the useful life, it is expected that the equipment will have a residual value of $20,000, although the lessee guarantees only $15,000. Northern incurs initial direct costs of $20,000, which they expense. The lease term for the equipment is 8 years, with the first payment of $ 26, 500 due upon delivery, and seven subsequent annual payments of $ 26, 500 beginning on December 31, 2019 and ending on December 31, 2025. The lease is properly classified as a sales-type lease.

Required - What is Northern's implicit rate for the lease?

Reference no: EM132866119

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