On January 1, 2023, Carla Vista Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $426,000 and Carla Vista purchased it from Manufacturing Solutions Ltd. specifically for Rock River. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses Carla Vista $4,700 each January 1 for a portion of the repairs and maintenance expenditures, which cost Carla Vista a total of $6,300 per year. At the end of the five-year agreement, the compression equipment will revert to Carla Vista and is expected to have a residual value of $27,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Carla Vista. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) * Your answer is incorrect. Assume that Carla Vista has a required rate of return of 9%. Calculate the amount of the lease payments that would be needed to generate this return on the agreement if payments were made each: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.) December 31 96591.31 $ 96591.31 January 1 The lease payments $
On January 1, 2023, Carla Vista Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $426,000 and Carla Vista purchased it from Manufacturing Solutions Ltd. specifically for Rock River. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses Carla Vista $4,700 each January 1 for a portion of the repairs and maintenance expenditures, which cost Carla Vista a total of $6,300 per year. At the end of the five-year agreement, the compression equipment will revert to Carla Vista and is expected to have a residual value of $27,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Carla Vista. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) * Your answer is incorrect. Assume that Carla Vista has a required rate of return of 9%. Calculate the amount of the lease payments that would be needed to generate this return on the agreement if payments were made each: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.) December 31 96591.31 $ 96591.31 January 1 The lease payments $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023, Carla Vista Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a
compression system. The system cost $426,000 and Carla Vista purchased it from Manufacturing Solutions Ltd. specifically for Rock
River. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses
Carla Vista $4,700 each January 1 for a portion of the repairs and maintenance expenditures, which cost Carla Vista a total of $6,300
per year. At the end of the five-year agreement, the compression equipment will revert to Carla Vista and is expected to have a
residual value of $27,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important
uncertainties surrounding the costs that have not yet been incurred by Carla Vista.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
(a)
× Your answer is incorrect.
Assume that Carla Vista has a required rate of return of 9%. Calculate the amount of the lease payments that would be needed to
generate this return on the agreement if payments were made each: (Round factor values to 5 decimal places, e.g. 1.25124
and final answers to 2 decimal places, e.g. 5,275.)
The lease payments
January 1
December 31
96591.31
$
96591.31
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