Textbook Notes (290,000)

CA (170,000)

UTSG (10,000)

Rotman Commerce (1,000)

RSM221H1 (10)

Scott Douglass (5)

Chapter

Department

Rotman CommerceCourse Code

RSM221H1Professor

Scott DouglassThis

**preview**shows pages 1-3. to view the full**20 pages of the document.**EXERCISE 20-15 (25-35 minutes)

(a) Part 1. Annuity Due:

Fair market value of leased asset to lessor $415,000.00

Less: Present value of unguaranteed

residual value $25,000 X .68058

(present value of 1 at 8% for 5 periods) 17,014.50

Amount to be recovered through lease payments $397,985.50

Five periodic lease payments $397,985.50 ÷ 4.31213* $92,294.41

*Present value of annuity due of 1 for 5 periods at 8%.

Excel formula =PMT(rate,nper,pv,fv,type)

Using a financial calculator:

PV $ (415,000)

I 8%

N 5

PMT $ ? Yields $92,294

FV $ 25,000

Type 1

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

EXERCISE 20-15 (Continued)

(a) Part 2. Ordinary Annuity:

Fair market value of leased asset to lessor $415,000.00

Less: Present value of unguaranteed

residual value $25,000 X .68058

(present value of 1 at 8% for 5 periods) 17,014.50

Amount to be recovered through lease payments $397,985.50

Five periodic lease payments $397,985.50 ÷ 3.99271* $99,678.04

*Present value of annuity due of 1 for 5 periods at 8%.

Excel formula =PMT(rate,nper,pv,fv,type)

Excel formula =PMT(rate,nper,pv,fv,type)

Using a financial calculator:

PV $ (415,000)

I 8%

N 5

PMT $ ? Yields $99,678

FV $ 25,000

Type 0

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

EXERCISE 20-15 (Continued)

(b) 1

Vick Leasing Inc., (Lessor)

Lease Amortization Schedule

Date

Annual

Lease

Payment

Plus URV

Interest

(8%) on Net

Investment

Net

Investment

Recovery

Balance

of Net

Investment

Jan. 1, 2011 $415,000.00

Jan. 1, 2011 $92,294.00 $92,294.00 322,706.00

Jan. 1, 2012 92,294.00 $25,816.48 66,477.52 256,228.48

Jan. 1, 2013 92,294.00 20,498.28 71,795.72 184,432.76

Jan. 1, 2014 92,294.00 14,754.62 77,539.38 106,893.38

Jan. 1, 2015 92,294.00 8,551.47 83,742.53 23,150.85

Jan. 1, 2016 25,000.00 1,849.15 23,150.85 0

$486,470.00 $71,470.00 $415,000.00

(b) 2

Vick Leasing Inc., (Lessor)

Lease Amortization Schedule

Date

Annual

Lease

Payment

Plus URV

Interest

(8%) on Net

Investment

Net

Investment

Recovery

Balance

of Net

Investment

Jan. 1, 2011 $415,000.00

Dec. 31, 2011 $99,678.00 $33,200.00 $66,478.00 348,522.00

Dec. 31, 2012 99,678.00 27,881.76 71,796.24 276,725.76

Dec. 31, 2013 99,678.00 22,138.06 77,539.94 199,185.82

Dec. 31, 2014 99,678.00 15,934.87 83,743.13 115,442.69

Dec. 31, 2015 99,678.00 9,235.31 90,442.69 25,000.00

Dec. 31, 2015 25,000.00 - 25,000.00 0.00

$523,390.00 $108,390.00 $415,000.00

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