On January 1, Garcia Supply leased a truck for a three-year period, at which time possession of the truck will revert back to the lessor.

On January 1, Garcia Supply leased a truck for a three-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $18,500 due on December 31 of each year, calculated by the lessor using a 4% discount rate. Negotiations led to Garcia guaranteeing a $51,900 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $50,300. (