Lessor profit; income statement effects; Type A lease
Response to the following :
In the situation described in problem 1, assume the asset being leased cost the lessor $125,000 to manufacture and that the agreement causes the lessee to obtain "control" of the leased asset. Determine the price at which the lessor is "selling" the right to use the asset (present value of the lease payments). What would be the amounts related to the lease that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)?
Problem 1:
Lessee; accrued interest; balance sheet effects; Type A lease
A Type A lease agreement calls for annual lease payments of $26,269 over a six-year lease term, with the first payment at January 1, the beginning of the lease, and subsequent payments at January 1 in each of the following five years. The interest rate is 5%. If the lessee's fiscal year is the calendar year, what would be the amount of the lease payable that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable?