What is the amount of residual value

Assignment Help Accounting Basics

Reference no: EM132213089

Question: On December 31, 2017, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2023. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below:

Dec. 31	Payments	Interest	Decrease in Balance	Outstanding Balance
2017				$519,115
2017	$90,000		$90,000	429,115
2018	$90,000	$17,165	72,835	356,280
2019	$90,000	14,251	75,749	280,531
2020	$90,000	11,221	78,779	201,752
2021	$90,000	8,070	81,930	119,822
2022	$90,000	4,793	85,207	34,615
2023	$36,000	1,385	34,615	0

What is the amount of residual value guaranteed by Reagan to the lessor?

Multiple Choice

$1,385.

$34,615.

$36,000.

Cannot be determined from the given information.

Reference no: EM132213089

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