Question
In: Accounting
On January 1, 2010, NATIONAL GAS has signed a 12-year lease agreement for an equipment. Annual...
On January 1, 2010, NATIONAL GAS has signed a 12-year lease
agreement for an equipment. Annual payments are OMR 5,000 at the
beginning of each year. At the end of the lease, the Lessee has the
right to exercise BPO or BRO at the end of the lease agreement. The
equipment has a useful life of 15 years and has no residual value.
At the time of the lease agreement, the equipment has a fair value
of OMR 50,000. An interest rate of 5% is paid and reducing balance
depreciation method is used.
Required:
Prepare amortization table for 10 years if the PV of the
minimum lease payments is OMR 48,000.
Solutions
Expert Solution
| Year | Installment | Interest | Principal repaid | Closing balance |
| 48,000.00 | ||||
| 0 | 5,000.00 | 2,150.00 | 5,000.00 | 45,150.00 |
| 1 | 5,000.00 | 2,257.50 | 2,742.50 | 42,407.50 |
| 2 | 5,000.00 | 2,120.38 | 2,879.63 | 39,527.88 |
| 3 | 5,000.00 | 1,976.39 | 3,023.61 | 36,504.27 |
| 4 | 5,000.00 | 1,825.21 | 3,174.79 | 33,329.48 |
| 5 | 5,000.00 | 1,666.47 | 3,333.53 | 29,995.96 |
| 6 | 5,000.00 | 1,499.80 | 3,500.20 | 26,495.75 |
| 7 | 5,000.00 | 1,324.79 | 3,675.21 | 22,820.54 |
| 8 | 5,000.00 | 1,141.03 | 3,858.97 | 18,961.57 |
| 9 | 5,000.00 | 948.08 | 4,051.92 | 14,909.65 |
| 10 | 5,000.00 | 745.48 | 4,254.52 | 10,655.13 |
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