Lease Illustration #4
Illustration #4 Capital lease, DF, no BPO, unguaranteed RV
Information: Three year lease, signed 1/1/x1.
- Estimated useful life of the asset is six years.
- The present value of the minimum lease payments (MLP) equals the cost of the asset, $90,000.
- There is no transfer of ownership at the end of the lease; there is an estimated residual value of $10,000, unguaranteed
- 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 10% which is known to the lessee. Accounting year for both parties ends December 31.