JKL leased an asset to RST that cost $100,000 when purchased by JKL.The lease term was for six years and specified year-end rentals.JKL earns a $12,000 dealer's profit and uses an interest rate of 14 percent to compute the annual rentals.The amount of each annual rental must be:
A)$28,802
B)$21,280
C)$18,666
D)$16,666

Question

Quizplus · Accepted Answer

The amount of each annual rental is calculated using the cost of the asset plus the dealer's profit, which totals $112,000 ($100,000 cost + $12,000 profit), and applying the interest rate of 14% to determine the annual rentals over the lease term of six years. The correct calculation involves using the formula for the present value of an annuity, which, given the specifics, results in annual rentals of $28,802.

JKL Leased an Asset to RST That Cost $100,000 When