Question

On January 1, Roberts Co. leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor Annual lease payments are $11,500 due on December 31 of each year, calculated by the lessor using a 8% discount rate. Negotiations led to Roberts guaranteeing the lessor a $34,500 residual value at the end of the lease term although Roberts estimates that the residual value after four years will be $32,100. What is the amount to be added to the right-of-use asset and lease payable under the residual value guarantee? (Round your answer to the nearest whole dollar.) 0:40:49 The present value of $1: n = 4, i = 8% is 0.73503. The present value of an ordinary annuity of $1: n = 4,1 = 8% is 3.31213. The present value of an annuity due of $1: n = 4, 7-8% is 3.57710. Multiple Choice o o o o

Answer 1

residual value guarantee = guaranteed residual value - expected residual value

residual value guarantee = $34,500 - $32,100

residual value guarantee = $2,400

present value of residual value guarantee = $2,400 * present value of $1: n=4, i=8%

residual value guarantee = $2,400 * 0.73503

residual value guarantee = $1,764

hence, the amount to be added to the right-of-use asset and lease payable under the residual value guarantee is $1,764

hence, the correct answer is C) $1,764

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