Question - Tempe Corp. leased some equipment to Glendale, Inc. on January 1, 2010. The lease required six annual payments, with the first payment due on December 31, 2010. The cost, and also fair value, of the equipment was $140,000, and there was no estimated residual value at the end of the six-year period. The lease was a direct financing lease and does qualify as a capital lease for Tempe.
Tempe's desired rate of return is 9%.
Use the following factors for 6 periods: 9%
Present value of an ordinary annuity 4.485919
Present value of annuity due 4.889651
Required: Compute the annual payment. Be sure to show your work.