Question

On December 31, 2019, Burke Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of

Answer 1

$39,405

Step-by-step explanation:

Computation for the present value of the lease payments.

Using this formula

Present value of the lease payments=Beginning annual payments*Present value of an annuity due of 1 for 5 periods at 5%.

Let Plug in the formula

Present value of the lease payments=$8,668 × 4.54595

Present value of the lease payments=$39,405

Therefore the present value of the lease payments is $39,405