Section 3 - Q1
[Section 3 general information stays the same. It is repeated for your information. Section 2 and
Section 3 are based on the same set of information.]
Bentley Inc. (the lessor) leases an asset to Haley Corp. (the lessee) for four years. Data relating to
this lease are provided below. Assume this lease is a capital lease in all parts below. Answer the
following questions for Bentley Inc. (the Lessor).
1. Lease is signed on 1/1/1
2. Lease term: 4 years
3. Remaining useful life of leased asset as of 1/1/1: 5 years
4. Cost of leased asset to lessor (less than FMV of leased asset): $35,000
5. Expected fair market value of leased asset on 12/31/4: $1,000
6. Expected fair market value of leased asset on 12/31/5: $6,000
7. Incremental borrowing rate and rate implicit in lease: 10%
8. Actual fair market value of leased asset on 12/31/4: $8,000
9. Actual fair market value of leased asset on 12/31/5: $5,000
10. Payments of $20,000 are to be made at the end of each year. Executory costs represent $2,000
of the $20,000 payment.
11. The lease contains a guaranteed residual value on 12/31/4 of $4,000.
What is the lease receivable balance on 1/1/1?
PV of MLPs = (i=
, pmt=
, FV=
%, n=
.0) -
PV of UGRV =
Lease Receivable =
