On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance...

On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Jan. 1	Payments	Effective Interest	Decrease in Balance	Outstanding Balance
2018				388,229
2018	43,000		43,000	345,229
2019	43,000	37,975	5,025	340,204
2020	43,000	37,422	5,578	334,626
2021	43,000	36,809	6,191	328,435
2022	43,000	36,128	6,872	321,563
2023	43,000	35,372	7,628	313,935
—	—	—	—	—
—	—	—	—	—
—	—	—	—	—
2035	43,000	16,314	26,686	121,619
2036	43,000	13,378	29,622	91,997
2037	43,000	10,120	32,880	59,117
2038	65,620	6,503	59,117	0

Required:

1. What is the lease term in years?
2. What is the asset’s residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.)
3. What is the effective annual interest rate? (Round your percentage answer to 1 decimal place.)
4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.)
5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.)
6. What is United’s net investment at the beginning of the lease (after the first payment)? (Round your answers to nearest whole dollar.)
7. What is United’s total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.)
8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest whole dollar.)

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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