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Homework answers / question archive / on jan 2, 2021 Blossom Inc
on jan 2, 2021 Blossom Inc. leased equipment with a cost of $460000 to Silver Point Co. The 5 year lease calls for a 10% down payment and equal annual payments at the end of each year. the equipment has an expected useful life of 5 years. if the selling price is $760000 and the rate implicit in the lease is 8% what are the equal annual payments
If information is as follows? --
PV ANNUITY DUE PV ORDINARY ANNUITY PV SINGLE SUM
8%, 5 periods 4.31213 3.99271 0.68058
10%, 5 periods 4.16987 3.79079 0.62092
Selling price= $760000
Down payment= $760000* 10%= 76000
Lease liability at the inception of lease= 760000- 76000
= 684000
PV interest factor of an annuity $1 at 8% for 5 period= 3.99271
So,
Equal annual payments= 684000/ 3.99271
= $171,312.22 or $171,312
