er to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Payment Cash Payment Effective Interest Decrease in Balance Outstanding Balance 32,350 1 7,000 ?? ?? 25,350 2 7,000 1,775 5,225 20,125 3 7,000 1,409 5,591 14,534 4 7,000 1,017 5,983 8,551 5 7,000 ?? ?? ?? 6 2,300 150 2,150 0
er to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Payment Cash Payment Effective Interest Decrease in Balance Outstanding Balance 32,350 1 7,000 ?? ?? 25,350 2 7,000 1,775 5,225 20,125 3 7,000 1,409 5,591 14,534 4 7,000 1,017 5,983 8,551 5 7,000 ?? ?? ?? 6 2,300 150 2,150 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.
Lease |
Cash |
Effective |
Decrease in |
Outstanding |
||||||
|
|
|
|
|
|
|
|
|
32,350 |
|
1 |
7,000 |
|
?? |
|
|
?? |
|
|
25,350 |
|
2 |
7,000 |
|
1,775 |
|
|
5,225 |
|
|
20,125 |
|
3 |
7,000 |
|
1,409 |
|
|
5,591 |
|
|
14,534 |
|
4 |
7,000 |
|
1,017 |
|
|
5,983 |
|
|
8,551 |
|
5 |
7,000 |
|
?? |
|
|
?? |
|
|
?? |
|
6 |
2,300 |
|
150 |
|
|
2,150 |
|
|
0 |
|
What is the outstanding balance after payment 5?
- $2,150.
- $2,300.
- $2,450.
- $4,450.
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