Question

Skysong Company, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1, 2017. The lease is for a 7-year period and requires equal annual payments of $30,259 at the beginning of each year. The first payment is received on January 1, 2017.Skysong had purchased the machine during 2016 for $95,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Skysong. Skysong set the annual rental to ensure an 9% rate of return.The machine has an economic life of 8 years with no residual value and reverts to Skysong at the termination of the lease.
Compute the amount of the lease receivable.The amount of the lease receivable $

Answer 1

Answer:

$ 165,998.41  

Explanation:

The amount lease receivable is the present value of annual lease rental which is $30,259  per for 7 years.

The present value can be determined using the present value formula in excel given below:

=-pv(rate,nper,pmt,fv,type)

rate is the 9% rate of return per year

nper is the number of years the payment would be made which is 7

pmt is the regular lease payment per year which is $30.259

fv is the total payments payable by the leasee which is unknown

type is 1 since payment is received at the beginning of the year,it would have been zero if payments are expected end of the year

=-pv(9%,7,30259,0,1)=$165,998.41