Ask Question
9 November, 04:46

On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Marin to make annual payments of $8,566 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Marin uses the straight-line method of depreciation for all of its plant assets. Marin's incremental borrowing rate is 7%, and the lessor's implicit rate is unknown.

What type of lease is this?

Compute the present value of lease

+5
Answers (1)
  1. 9 November, 05:05
    0
    The answer is given below;

    Explanation:

    This is operating lease as the machine will revert back to lessor at the end of lease term.

    Present value of lease=R (1 - (1+i) ^-n) / i

    where R=8,566

    i=7%

    n=5 year

    P=8,566 (1 - (1+) ^-5) /.07

    P=8,566*4.10=$35,122
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Marin to ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers