Equipment with a Fair Value of $625,000 and Zero Residual

question 150

Multiple Choice

Equipment with a fair value of $625,000 and zero residual value is to be leased through annual lease payments made at the start of each year over 10 years. If interest is 6% compounded quarterly, determine the value of the annual lease payments.

• A) $53,385.45
• B) $58,478.56
• C) $62,500.00
• D) $80,000.06
• E) $80,525.57

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Definitions:

Agency Coupled With An Interest

An irrevocable agency agreement in which the agent is given an interest in the subject matter of the agency. Also called irrevocable agency.

Principal

The original sum of money borrowed in a loan, or the amount of the investment, not including the interest or profits.

Agency Relationship

A legal bond where one party, the agent, acts on behalf of another, the principal, in dealings with third parties.

Financial Year End

Financial year end is the completion of a one-year, or 12-month, accounting period; the date when companies must finalize their financial statements and report their financial performance.