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Answer the following question: Information has been gathered for Lease A: The fair...

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Accounting

Answer the following question:

Information has been gathered for Lease A:

  • The fair value of the equipment is $800,000 at the inception of the lease
  • The lease term is 5 years, and there is a 3-year renewal term at the option of the lessor
  • Annual lease payments are $145,000 per year for the first 5 years and $100,000 for the next 3 years.
  • Payments are due at the beginning of each lease year
  • All lease payments include the cost of insurance, estimated at $15,000 per year
  • The lessee has a residual guarantee value of $40,000 at the end of the 8th year
  • The lessee does not know the lessor's implicit rate of interest in the lease.
  • The lessee's incremental borrowing rate is 8%.

Calculate the present value of the right-of-use asset for the lease.

Answer: 560577 + 161010 + 21611 = 743198

Use excel and show all formulas clearly.

Answer & Explanation Solved by verified expert
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