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How much annual lease payment should velde pay to lessor

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Question - Velde Company, as lessee, enters into a lease agreement on January 1, 2020, for equipment with Exceptional Computer Company (lessor). The equipment is not of a specialized nature.

-The lease agreement is non-cancellable with a term of three years.

-The equipment has a cost and fair value at commencement of the lease of $50,000, an estimated economic life of five years, and a residual value at the end of the lease $10,000 (unguaranteed).

-The lease contains no renewal options. The equipment reverts to Exceptional Computer Company at the termination of the lease. Rental payments are made at the beginning of each year.

-The implicit rate of Exceptional Computer Company (the lessor) is 6% and is known by Velde Company. Note: Present Value of $1(n=3, i=6%)=0.83962

Present Value of an Annuity Due (n=3, i=6%)=2.8333

Based on above information, how much annual lease payment should Velde pay to lessor?

Reference no: EM132975251

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