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NNADVOKAT [17]
3 years ago
14

Glade Company leases computer equipment to customers under direct financing leases. The equipment has no residual value at the e

nd of the lease term, and the leases do not contain bargain purchase options. Glade wishes to earn 8% interest on a five-year lease of equipment with a fair value of $323,400. Use tables (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required:
Compute the total amount of interest revenue that Glade will earn over the life of the lease. (Round your intermediate and final answers to 2 decimal places.)
Business
1 answer:
Dennis_Churaev [7]3 years ago
5 0

Answer:

$51,588.70

Explanation:

The computation of the total amount of interest revenue is shown below:-

Annual lease payments = Fair value of Equipment ÷ PV factor of $1 annuity due

= $323,400 ÷ (1 + (1 - (1.08)^-4) ÷ 0.08)

= $323,400 ÷ 4.31213

= $74,997.74

Now,

Total interest revenue = Gross lease payments receivable - Fair value

= $74,997.74 × 5 - $323,400

= $374,988.70 - $323,400

= $51,588.70

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