Can someone help me calculate the present value on a lease? See the information below.
January 1, company A (Lessor) leases a car to Company B (lessee) for 5 years with annual payments of $2,000 due at time of signing and annually beginning on December 31 thereafter.
The useful life of the car is 10 years.
There is no bargain purchase option available to Company B.
There is no automatic title transfer to Company B at lease term
The fair value of the care at the time of lease signing is $9,000.
Company B incremental borrowing rate is 8% and the rate implicit in the lease is not known to Company B.
The example in the study guide says the present value is $8,624 can someone help me get to this figure?
Thanks.
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SARAH ELEDGE
Accountant
Chattanooga TN
United States
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