LOR Leased a Computer to LES Which Cost the Lessor

question 2

Multiple Choice

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

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Definitions:

Inadequate

Lacking the quality or quantity required; insufficient for a purpose.

Assets

Economic resources owned or controlled by an individual or entity, expected to produce future benefits.

Default

The failure to fulfill a financial obligation, such as not making the required payments on a loan.

Credit

The trust which allows one party to provide resources to another party wherein the second party does not reimburse the first party immediately but promises either to repay or return those resources at a later date.