Reference no: EM132845297
Question - On 1 July 2018, Company Z leased a vehicle from Company W. The vehicle cost W $22,065.3, considered to be its fair value on that same day. The finance lease agreement contained the following provisions:
-The lease term is 2 years, starting on 1 July 2018.
-Annual lease Payment, payable on 30 June each year is $7,000.
-Estimated useful life the Vehicle is 5 years.
-Estimated Residual Value of the vehicle at the end of the lease is $12,000.
-Residual Value Guaranteed by Company Z is 9,000.
-Interest rate implicit in the lease is 10%.
-Present value of an annuity: PVIFA (T2, 10%, 2Y) = 1.7355.
-Present value of $1: PVIF (T1, 10%, 2Y) = 0.8264.
Required - Compute the PV of the lease payment by company Z (lessee) at 1 July 2018?