Question

Kingbird Company leases equipment for 8 years with an annual rental of $3,300 per year or...

Kingbird Company leases equipment for 8 years with an annual rental of $3,300 per year or $26,400 in total. General Leasing (the lessor) agrees to provide Kingbird with $200 for the first 2 years of the lease to defray needed repairs to the equipment.

Determine the lease payments that Kingbird will pay for the first 3 years of the lease agreement.

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Answer #1

Annual rental should be multiplied by the number of years to get the total lease rent. Then the amount that is provided by the lessor for repairing must be deducted to get the lease payment amount.

Total lease rent = Annual rent × Years

                        = $3,300 × 3

                        = $9,900

Repairing amount = $200 × 2 = $400

Lease payment amount = Total lease rent – Repairing amount

                                    = 9,900 – 400

                                    = $9,500

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