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Direct financing and sales-type lease




Problem 15-3 Direct financing and sales-type lease, lessee and lessor [LO15-3, 15-5, 15-6];Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $1,900,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2013.;Lease Description;Quarterly lease payments $ 123,990 ? beginning of each period;Lease term 5 years (20 quarters);No residual value, no BPO;Economic life of lithotripter 5 years;Implicit interest rate and lessee's incremental borrowing rate 12 %;Fair value of asset $ 1,900,000;Collectibility of the lease payments is reasonably assured, and there are no lessor costs yet to be incurred.


Paper#24250 | Written in 18-Jul-2015

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