The Following Are the Characteristics of a Lease Required:
Determine the Present Value of Minimum Lease Payments (MLP)and

question 94

Essay

The following are the characteristics of a lease:
$$\begin{array} { | l | l | } \hline \text { Fair value of leased asset } & 150,000 \\\hline \text { Lease payments } & 25,500 \\\hline \text { Lease term } & 7 \\\hline \text { Payment frequency } & \text { Antual } \\\hline \text { Payment timing } & \text { End of year } \\\hline \text { Guaranteed residual value } & \text { None } \\\hline \text { Interest rate implicit in lease } & 8 \% \\\hline\end{array}$$
Required:
Determine the present value of minimum lease payments (MLP)and the appropriate classification of this lease for the lessee.

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Definitions:

Parent Company

A company that owns a controlling interest in another company or companies, known as subsidiaries.

Outsourced

The process of hiring external organizations or individuals to perform services or create goods that traditionally were performed in-house by the company's own employees and staff.

Open Source

Pertaining to software for which the original source code is made freely available and may be redistributed and modified.

Logistics

The detailed organization and implementation of a complex operation, often referring to the commercial transportation and coordination of goods.