Answered: . Compute the total financial revenue…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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Question

Oden Company is in the business of leasing new sophisticated equipment. As lessor, Oden Company expects a 12% return on the net investment.
All leases are classified as direct financing. At the end of the lease term, the equipment will revert to Oden Company.
On January 1, 2020, an equipment is leased to a lessee with the following information.

Cost of equipment to Oden 5,250,000
Residual value-unguaranteed 600,000
Annual rental payable in advance 900,000
Useful life and lease term 8 years
Implicit interest rate 12 %
First lease payment Jan 1, 2020
Required:
1. Compute the total financial revenue
2. Prepare a table amortization for the lease receivable and interest income.

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