Calculate the annual payment required

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Reference no: EM131077973

J Manufacturing signed an agreement on January 1, 2015 to lease a Machine to ABC Company. The following information relates to this agreement. 1. The term of lease is 10 years. Non cancellable. 2. The machine has an estimated economic life of 20 years 3. The cost of fair value of the 3,500,000 4. The asset will not revert back to the lessor at the end of the lease at which time the asset is expected to have a residual value of 500,000, which is guaranteed. 5. Executory cost are $1000. ABC assumes direct responsibility for all executory costs. 6. The agreement requires equal annual payments, beginning on January 1, 2015 7. Assume than J manufacturing desires a 10% rate of return on its investment and the barrowing rate is 8% and is known by both parties. A. Calculate the annual payment required B. Calculate the balance on the receivable account of J at the end of year 2

Reference no: EM131077973

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