Merlin Co Leased Equipment to Houdini Inc

question 26

Essay

Merlin Co. leased equipment to Houdini Inc. The equipment cost the lessor $200,000. The appropriate interest rate for this lease is 15%. The annual lease payments are made at the end of each year. The lease term is three years. The residual value at the end of the lease term is expected to be $40,000. Houdini has the option to purchase the equipment at that time for $20,000. Assume this is a direct financing lease. Required:
1. For this lease:
(a.) The lease payment computed by the lessor is $ _____________.
(b.) The amount the lessee should capitalize is $ ____________.
2. How much interest should be recognized at the end of year 1 by the:
(a.) Lessor? $ __________
(b.) Lessee? $ _____

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Definitions:

Intentional Health Behaviors

Actions undertaken by individuals with the purpose of improving or maintaining their health.

Risky Health Behaviors

Actions that individuals engage in that can increase their chances of disease or harm, such as smoking, excessive alcohol consumption, and unsafe sexual practices.

Theory Of Planned Behavior

A psychological theory that links beliefs and behavior, suggesting that an individual's behavioral intention is influenced by their attitude towards the behavior, subjective norms, and perceived control over the behavior.

Gender Differences

The distinctions in characteristics and behaviors typically associated with being male or female.