Ajax Inc. has entered into an operating lease that calls for 5 equal payments of $15,000 each year, payable at the beginning of the year. The implicit interest rate of the lease is 3.5 percent per year. The present value of the lease is $70,096.19. If the interest portion of the third $15,000 payment is $1,470.86, what would be the principal portion of that payment and the asset amortization amounts for the second year?
Question 1 options:
Principal: $13,529.14; Asset Amortization: $14,019.24 |
|
Principal: $14,019.24; Asset Amortization: $14,019.24 |
|
Principal: $13,529.14; Asset Amortization: $13,529.14 |
|
There is not enough information to determine the answer. |
Answer :
the principal portion of that payment $13,071.63 and the asset amortization amounts for the second year $14,019.24.
Asset Amortization = 70096.19/5 = 14019.24
Principal payments:
Year | Bal Due at Beg of Year | Paid at beg of Year | Interest @ 3.5% | Principal payment | Bal at end of year |
1 | 70096.19 | 15000 | 0 | 15000 | 55096.19 |
2 | 55096.19 | 15000 | 1928.37 | 13071.63 | 42024.56 |
3 | 42024.56 | 15000 | 1470.86 | 13529.14 | 28495.42 |
4 | 28495.42 | 15000 | 997.34 | 14002.66 | 14492.76 |
5 | 14492.76 | 15000 | 507.25 | 14492.75 | 0.00 |
Get Answers For Free
Most questions answered within 1 hours.