Courtland Company leased a new machine from Brendan Company. The lease term is 5 years; the estimated life of the machine is 8 years. Payments of $60,000 are due at the beginning of each year. The interest rate is 9%. The present values of an annuity due at 9% for 5 periods and 8 periods are, respectively 4.24 and 6.03. Courtland has the option to purchase the machine at the end of the lease term for $75,000, which is well below the expected fair value on that date. The present value of 1 for 5 periods and 8 periods are, respectively 0.65 and 0.50. Courtland should record a ROU asset of $254,400 $303,150 $361,800 $399,300

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.