Enter into a lease agreement with precision inc

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Reference no: EM132706469

Sunland Design Inc. (SD) is a privately owned business that provides interior decorating options for consumers. SD follows ASPE. The software that it purchased six years ago to present clients with designs that are unique to their offices is no longer state of the art, and SD has to make a decision on replacing its software. The company has two options:

Problem 1. Enter into a lease agreement with Precision Inc. whereby SD makes an upfront lease payment of i$11,890 on January 1, 2021, and annual payments of $4,640 over the next five years on each December 31. At the end of the lease, SD has the option to buy the software for $5,045. The first annual lease payment is on December 31, 2021.

Problem 2. Enter into a lease agreement with Graphic Inc. on January 1, 2021, whereby SD makes five annual lease payments of $6,535, beginning on January 1, 2021. SD may purchase the software at the end of the lease period for $184. This is considered a bargain price compared with the offer of $5,045 in the proposal from Precision Inc.

Reference no: EM132706469

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