LOR leased a computer to LES which cost the lessor $8,000.The terms of the lease specify four years, an annual interest rate of 15 percent, and four year-end rental payments.The lease qualifies as a finance lease (direct financing).The lessor will get the computer after the fourth year and its residual value at that time is estimated to be $1,000.The amount of each rental payment is (round to the nearest dollar):
A)$2,000
B)$2,501
C)$2,602
D)$2,335

Question

Quizplus · Accepted Answer

The rental payment is calculated using the formula for an annuity, considering the present value of the lease payments and the residual value. The present value of the lease payments should equal the cost of the computer minus the present value of the residual value. Solving this with the given interest rate and terms results in approximately $2,602 per year.

LOR Leased a Computer to LES Which Cost the Lessor