The lessor Rivaldi, which is neither a manufacturer nor a dealer, leases a generator whose carrying amount, equal to its fair value, is 132,880. The lessee will make 3 annual payments of 45,000, in arrears, and has a purchase option of 15,000 at the end of the third year, whose exercise is reasonably certain. There are no initial direct costs and no unguaranteed residual value. The implicit interest rate is 6 %. Compute the net investment and record Rivaldi's entry at the commencement date.
- Annual payment in arrears
- 45,000
- Number of annual payments
- 3
- Exercise price of the purchase option
- 15,000
- Interest rate implicit in the lease
- 6 %
- Carrying amount of the generator
- 132,880