FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Law Company leased a machine with a fair value of P 1,650,000 for a period of 5 years under a finance lease. The initial direct cost included in negotiating the lease amounted to P 12,500. The present value of the minimum lease payments discounted at the rate implicit in the lease is P 1,584,000. At what amount should the machine be recognized initially by Law Company? Show your solution.
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- NutraLabs, Incorporated, leased a protein analyzer to Werner Chemical, Incorporated, on September 30, 2024. • NutraLabs manufactured the machine at a cost of $5 million. • The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. • NutraLabs' implicit interest rate is 12%. • The useful life of the equipment is five years. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which NutraLabs is "selling" the equipment (present value of the lease payments) on September 30, 2024 2. What pretax amounts related to the lease would NutraLabs report in its balance sheet on December 31, 2024? 3. What pretax amounts related to the lease would NutraLabs report in its income statement for the year ended December 31, 2024? 4. What pretax amounts related…arrow_forwardUnder leasesarrow_forwardGive me perfect and correct answer with explanation..jarrow_forward
- Callaway Golf Co. leases telecommunications equipment from Sandhill Company. Assume the following data for equipment leased from Sandhill Company. The lease term is 5 years and requires equal rental payments of $30,380 at the beginning of each year. The equipment has a fair value at the commencement of the lease of $147,000, an estimated useful life of 8 years, and a guaranteed residual value at the end of the lease of $15,190. Sandhill set the annual rental to earn a rate of return of 6%, and this fact is known to Callaway. The lease does not transfer title or contain a bargain purchase option, and is not a specialized asset. How should Callaway classify this lease? ✓ Finance lease Operaing lease Sales-type leasearrow_forwardThe Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: $15,500 $20,500 $25,500 $30,500 An appropriate discount rate is 7 percentage, yielding a present value of $76,475. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will be the initial value of the lease liability? Initial value of the lease liabilityarrow_forwardBravo Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Bravo. The machine has a cash price of $780,000. Bravo wants to be reimbursed for financing the machine at a 12% annual interest rate over the five-year lease term.arrow_forward
- Use the information for Escapee Company from BE21.20. Assume the same facts, except Escapee guarantees a residual value of $9,000 at the end of the lease term, which equals the expected residual value of the machinery. (a) Does this change your answer from BE21.20? (b) What if the expected residual value at the end of the lease term is $5,000 and Escapee guarantees a residual of $9,000?arrow_forwardPlease help me. Thankyou.arrow_forwardOn January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000arrow_forward
- Metlock Company leases a building and land. The lease term is 8 years and the annual fixed payments are $840,000. The lease arrangement gives Metlock the right to purchase the building and land for $13,550,000 at the end of the lease. Based on an economic analysis of the lease at the commencement date, Metlock is reasonably certain that the fair value of the leased assets at the end of lease term will be much higher than $13,550,000. What are the total lease payments in this lease arrangement? Total lease payments Click if you would like to Show Work for this question: Open Show Workarrow_forwardKingbird Company leases a building and land. The lease term is 7 years and the annual fixed payments are $720,000. The lease arrangement gives Kingbird the right to purchase the building and land for $13,000,000 at the end of the lease. Based on an economic analysis of the lease at the commencement date, Kingbird is reasonably certain that the fair value of the leased assets at the end of lease term will be much higher than $13,000,000. What are the total lease payments in this lease arrangement? Total lease payments :____________arrow_forwardCan you help me with this problem with step by step explanation, please? Thank you :)arrow_forward
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