Determine the price at which the lessor is selling the asset

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Reference no: EM132217129

Question - King Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $39,128 over a eight-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 7%. The asset being leased cost Mann $200,000 to produce.

Required -

1. Determine the price at which the lessor is "selling" the asset (present value of the lease payments).

2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?

Reference no: EM132217129

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