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Construct a table showing payments of interest

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Question - On January 1, 2014, Hayes, Inc. leases equipment from Smithsonian Company for an annual lease rental of $25,000. The lease term is five years, and the lessor's interest rate implicit in the lease is 8%. The lessee's incremental borrowing rate is 8.25%. The useful life of the equipment is five years, and its estimated residual value equals its removal cost. Annuity tables indicate that the present value of an annual lease rental of $1 (at 8% rate) is $3.993. The fair value of leased equipment equals the present value of rentals. (Assume the lease is capitalized.) Construct a table showing payments of interest and principal made every year for the five-year lease term.

Reference no: EM132945358

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