Use
the information for Lalonde and Costner from BE20–2. Explain, using numbers,
how Costner determined the amount of the lease payment of $25,173.
In
BE Lalonde Ltd., a public company following IFRS, recently signed a lease for
equipment from Costner Ltd. The lease term is five years and requires equal
rental payments of $25,173 at the beginning of each year. The equipment has a
fair value at the lease’s inception of $112,400, an estimated useful life of
five years, and no residual value. Lalonde pays all executory costs directly to
third parties. The appropriate interest rate is 6%. Prepare Lalonde’s journal
entries at the inception of the lease.
Using Excel or a financial calculator solve the
payment amount:
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Excel formula
=PMT(rate,nper,pv,fv,type)
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Using a financial
calculator
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PV
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$ 112,400
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RATE
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6%
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NPR
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5
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PMT
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?
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Yields
$25,173
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FV
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$ 0
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Type
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1
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Using Table A-5 Present Value of an annuity due, 5
periods at 6% of 4.46511, payment = $112,400 / 4.46511= $25,172.95.
