Lease Illustration #1
Illustration #1 Illustrates a capital lease, DF, no BPO or RV
Information: Three year lease, signed 1/1/x1.
- Estimated useful life of the asset is three years.
- The present value of the minimum lease payments (MLP) equals the cost of the asset, $80,000.
- There is no transfer of ownership at the end of the lease; the estimated residual value (RV) is zero.
- There are no significant uncertainties surrounding this lease regarding collectibility or future performance.
- Three equal payments are required payable on ,each December 31, starting 12/31/x1.
- Lessor has a required rate of return of 12% which is known to the lessee. Accounting year for both parties ends December 31.