Lease Problem - On January 1 Lessee company signs a lease...

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Lease Problem: On January 1 Lessee Company signs a lease agreement with Lessor Company with the following terms: Payment due at the beginning of each year $20,000 Lease term 5 years; economic life 10 years Cost $65,000 Fair value $86,000 Interest rate 10% PV factors n=1 .909 n=2 .826 n=3 .751 n=4 .683 n=5 .621
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Unformatted text preview: On January 1 Lessee company signs a lease agreement with Lessor Company with the following terms: Payment due at the beginning of the year Bargain purchase option $4,000 Lease term 5 years; economic life 8 years Cost $60,000 Fair value $79,986 Incremental borrowing rate and implicit rate 10%...
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