Business, 19.02.2021 16:20 Daddysgirl2019

Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2020, is $737,000.
3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Blue estimates that the expected residual value at the end of the lease term will be 60,000. Blue amortizes all of its leased equipment on a straight-line basis.
4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5. The collectibility of the lease payments is probable.
6. Blossom desires a 10% rate of return on its investments. Blueâ€™s incremental borrowing rate is 11%, and the lessorâ€™s implicit rate is unknown.

(Assume the accounting period ends on December 31.)

Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e. g. 1.25124 and the final answer to 0 decimal places e. g. 58,972.)

Present value of minimum lease payments
$ ?

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Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The follow...

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