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What is the fair value of the equipment at the inception

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Question - Kensington Lid decides to lease some equipment from Piccadilly Lid on the following terms:

Duration of lease - 15 years

Life of leased asset - 17 years

Unguaranteed residual - $5,000

Lease payment - $6,000 at lease inception

Annual lease payments (in arrears) - $4,500 per year (15 payments)

If the interest rate implicit in the lease is 8%, what is the fair value of the equipment at the inception of the lease (rounded to the nearest dollar)?

A. $44,518

B. $46,094

C. $40,094

D. $48,399

Reference no: EM132224269

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