Hey Guys, i’m having trouble with the following question: The lessor has an asset on the books with a cost of $1,000. The lessor leases the asset out in terms of sales-type lease with the present value of the minimum lease payments equal to $1,300. The total minimum lease payments are 2,000 over the lease term. What do they mean when they say the minimum lease payments are 2 000 ?
Total minimum lease payments equals interest expense and principal reduction
MLP is regular yearly rental pmts plus the salvage value – the discounted MLP takes the total and discounts it to PV. interest x plus principal reduction equals to a YEARLY pmt
Take from the example above: Book Value= 1000 Given PV Lease payments= 1300 Given (Is that the Sales Price?) minimum lease payments are $ 2 000 (Thanks for the answers above but i still cant understand what these are?) Now it states that if Fair value is greater than Book value it is considered a Sale-Type Lease…right. From the information given how can one determine what the Fair or Market value is for this Asset?
Reineir, post the entire Q, verbatim. One word out, and you might be chasing something else than the Q asks.
Sorry guys…i’m making a mess here. I figured it out. Thanks.