Business, 14.10.2020 14:01 yair7

On January 1, 2021, Central Industries leased a high-performance conveyer to Dynamic Company for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Central. The equipment cost Central $1,912,000 and has an expected useful life of five years. Central expects the residual value on December 31, 2024, will be $600,000. Equal payments under the finance/sales-type lease are $400,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Dynamic is aware that Central used a 5% interest rate when calculating lease payments. Required: If negotiations led to the lessee guaranteeing a $300,000 residual value, i. e. the lessee is guaranteeing half of the estimated residual value at the end of the contract, answer the following questions: What is Central’s net investment in this lease? What is Central’s sales revenue from this lease? What is Central’s gross profit from this lease? If negotiations led to the lessee guaranteeing a $650,000 residual value, i. e., the lessee is guaranteeing more than the estimated residual value at the end of the contract, answer the following questions: What is Central’s lease receivable that will be recorded on January 1, 2021? What is Dynamic’s lease liability that will be recorded on January 1, 2021?

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On January 1, 2021, Central Industries leased a high-performance conveyer to Dynamic Company for a f...