Determining the principal amount of lease obligation

Reference no: EM13745785

On January 1, 2015, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of $10,000 are payable at the end of each year. Day knows that the lessor expects a 10 percent return on the lease. Day has a 12 percent incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party has guaranteed to pay Ward a residual value of $5,000 at the end of the lease.

The present value of an ordinary annuity of $1 at

12% for 10 years is 5.6502
10% for 10 years is 6.1446
The present value of $1 at
12% for 10 years is 0.3220
10% for 10 years is 0.3855

On Day's October 31, 2015, balance sheet, the principal amount of the lease obligation was

$61,446.
$58,112.
$56,502.
$63,374.

Reference no: EM13745785

Questions Cloud

Write summary of recent developments in campaign finance law : A summary of recent developments in campaign finance law in the United States, including acts of Congress and Supreme Court cases. A clear explanation as to why there should be more/less regulation of campaign finance.

Discuss the issues related to genetic diversity : Discuss the issues related to genetic diversity: mutations, sexual reproduction, migration, and population

What other concerns are presented by professors kuhlman : what other concerns are presented by Professors Kuhlman, Woodworth-Ney and Foner? Were these concerns answered with suffrage? Why, or why not?

What is function of dna polymerase iii in dna replication : What is the function of DNA polymerase III in DNA replication

Determining the principal amount of lease obligation : On Day's October 31, 2015, balance sheet, the principal amount of the lease obligation was

How was the legal status of the slave defined : How was the legal status of the slave defined? Who did the defining? What assumptions were made about the nature of the slave population?

Process of copying dna called semiconservative replication : Why is the process of copying DNA called semiconservative replication

Examine the relationship between npv and the pi : How have just-in-time inventory systems impacted the cash conversion cycle for firms? Examine the relationship between NPV and the PI

Briefly summarize how the electoral college works : briefly summarize how the Electoral College works. Explain some of the main pros and cons in the debate about whether to keep or abolish the current Electoral College process.

User Account

All Pages