Question

Assume that IBM leased equipment that was carried at a cost of 178,000 to Sandhill Company. The term of the lease is 6 years.

A) $30,000 per year
B) $29,667 per year
C) $29,500 per year
D) $28,000 per year

Answer 1

To find the annual lease payment, divide the total cost of the equipment ($178,000) by the lease term (6 years), resulting in $29,667 per year. The correct option is B.

Step-by-step explanation:

The student's question asks to calculate the annual lease payment IBM would charge Sandhill Company for a piece of equipment. But without additional information, such as interest rates or any special terms, the only straightforward calculation we can make is to divide the total cost of the equipment by the number of years in the lease. Therefore, using basic mathematics:

• Cost of equipment: $178,000
• Term of lease: 6 years
• Annual lease payment calculation: $178,000 / 6

This division results in an annual lease payment of $29,666.67, which when rounded, could be written as $29,667 per year (Option B).