Question

On January 1, Garcia Supply leased a truck for a five-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $16,500 due on December 31 of each year, calculated by the lessor using a 4% discount rate. Negotiations led to Garcia guaranteeing a $79,300 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $78,100. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee? (Round your answer to the nearest whole number.) Amount to be added

Answer 1

amount to be added $ 986 Guaranteed residual value less expected resildual value difference PV factor 4%.5th year C = AXB Present value $ $ $ 79,300 78,100 1,200 0.82193 986 Year 1 Year 2 Year 3 Year 4 Year 5 Annuity PV FACTOR @4% 0.96154 0.92456 0.88900 0.85480 0.82193 4.45182 $