Question: On January 1, 2018, National Insulation Corporation
On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: 
Required: 1. What is the lease term in years? 2. What is the asset’s residual value expected at the end of the lease term? 3. What is the effective annual interest rate? 4. What is the total amount of lease payments for United? 5. What is the total amount of lease payments for NIC? 6. What is United’s net investment at the beginning of the lease (after the first payment)? 7. What is United’s total effective interest revenue recorded over the term of the lease? 8. What amount would NIC record as a right-of-use asset at the beginning of the lease?
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Decrease Outstanding Jan. 1 Payments Effective Interost in Balance Balance 2018 192,501 2018 20,000 20,000 20,000 20,000 20,000 20,000 20,000 172,501 2019 17,250 16,975 16,673 2,750 169,751 2020 2021 3,025 3,327 166,726 163,399 159,739 155,713 2022 16,340 15,974 3,660 2023 4,026 7,364 6,101 4,711 3,182 2035 12,636 20,000 20,000 20,000 35,000 61,006 47,107 31,818 2036 13,899 2037 15,289 31,818 2038
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