On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $760,000 and has an expected useful life of eight years. Its normal sales price is $760,000. The residual value after six years is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 8%. Calculate the amount of the annual lease payments.
Q: Zenith Bank charges an interest rate of 16.9% per annum on a loan to Samson Ltd. The bank requires…
A: Rate of return refers to the return that is being earned over the investment amount by the investors…
Q: A bond has a coupon rate of 4.2% when yields are 3.16%. Coupon are paid semi-annuallly. If the…
A: Let's assume par value of the bond is $1000.Semiannual coupon amount (C) = $21 (i.e. $1000 * 0.042 /…
Q: What is the amount of premium/discount for a bond that has 4 years till it matures? The face value…
A: The objective of this question is to calculate the amount of premium or discount for a bond that has…
Q: You find the following Treasury bond quotes. To calculate the number of years until maturity, assume…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: Hornberger, Inc. recently paid a dividend of $2.00 per share. The next dividend is expected to be…
A: Current Dividend = d0 = $2Next Year dividend = d1 = $2.05Return on Equity = roe = 12%
Q: A firm's current stock price is $36.00 and it's last dividend was $2.40. the required rate of return…
A: In this question, we are required to determine the price of the stock after 5 years.
Q: Beryl's Iced Tea currently rents a bottling machine for $54,000 per year, including all maintenance…
A: Rent of a bottling machine = $54,000Purchase cost of renting machine = $160,000Maintenance cost =…
Q: IBC has the same beta as the overall market. If the expected return on the market is 5%, what is the…
A: In this question, we are required to determine the return on IBC stock.
Q: Fama's Llamas has a weighted average cost of capital of 9.4 percent. The company's cost of equity is…
A: WACC means weighted average cost of capital.It is calculated as follows:-WACC =…
Q: Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $11 billion…
A: Equity weight = 60% Debt weight = 40%Operating assets = $11 billionBefore-tax cost of debt = 8%WACC…
Q: Delta Sonic, a chain of full service automotive detailers, is considering introducing a new…
A: ParticularAmountExisting 1 hour service sales290000Sales from 15 minute sale service160000To…
Q: A corporation is evaluating a project with the following cash flows: Year 0: -28700 Year 1: 10900…
A: Capital budgeting is a process used by companies to evaluate and make decisions regarding…
Q: Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in five years, and have…
A: Par value = $1000Selling price= $960Annual coupon rate( Compounded semi-annually) = 7%Years to…
Q: On January 1, Carla Vista Inc. issued $7000000, 9% bonds for $7455000. The market rate of interest…
A: Bonds issued at premium.If the issue price of bond is greater than face value of bond, then bond is…
Q: Your paycheck was just deposited and you noticed that had overdrawn your bank account 10 days ago.…
A: The problem case focuses on calculating the effective annual rate charged for the overdraft…
Q: Larry Davis borrows $87,000 at 11 percent interest toward the purchase of a home. His mortgage is…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: Ohr just issued 9.2% 12-year bonds. Find the YTM if these bonds make semiannual pay are currently…
A: YTM is the required rate of bond and is the rate which equates the present value of coupon payments…
Q: Michael owns a portfolio that consists of the following two bonds: • Bond A: $1,000 par value bond…
A: Bond duration:Duration takes into account both the coupon payments received and the final principal…
Q: Bond A sells for $1010. Bond B sells for $990. Both bonds have a yield of 6%. Which bond has the…
A: Price of bond A = $1,010Price of bond B = $990Yield of both bonds = 6%Lower coupon rate = ?
Q: You have been given the following return information for a mutual fund, the market index, and the…
A: Jensen’s alpha-It is used to calculate the return on a portfolio in excess of its theoretical…
Q: Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants.…
A: Required return is computed as follows:-k = (ke*we)+(kd*wd)wherek=Required returnke= cost of…
Q: money, what is the maximum amount the stockholders would receive in a bankruptcy settlement? What is…
A: The amount per share describes the monetary value allotted to each individual share of stock in a…
Q: Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at…
A: The comparison of the present value of cash inflows and outflows over time is made with the help of…
Q: I have been considering refinancing my house. To do so, I will need to borrow $300,000. The loan…
A: Payment per period can be calculated using PMT function in excel.PMT(rate, nper, pv, [fv],…
Q: fter a long career an engineer retires with $1.4 million in a retirement account. The engineer…
A: In retirement planning money should be sufficient to meet the income needed on retirement based on…
Q: Your firm is considering the launch of a new product, the XJ5. The upfront development cost is $10…
A: NPV is an important capital budgeting metric. NPV stands for net present value. Essentially NPV is…
Q: WHAT IS A CONCESSIONARY LOAN? Select one O a A LOAN FROM THE PARENT COMPANY TO ITS RIVAL COMPANIES…
A: In this question, we are required to determine what a concessionary loan means.
Q: A local bank is running the following advertisement in the newspaper: "For just $5,000 we will pay…
A: Initial deposit = $5,000Annual payment = $300
Q: Flowers must raise $227 million for its future expansion. To do so, Jasmine expects to issue new…
A: Companies raise money through issues of stock but there are cost related to issues of shares like…
Q: Suppose you want to have $800,000 for retirement in 30 years. Your account earns 5% interest- a) How…
A: Future value of annuity is computed as follows:-FV= A*whereFV= future value of annuityA= periodic…
Q: Annual Life Project Investment Income Project 22A $17,220 6 years 23A 21,000 9 years 24A 15,700 7…
A: Internal rate of return is the capital budgeting metric of analyzing projects which is profitable to…
Q: You borrow $675,000 to buy a home using a 30-year mortgage with an interest rate of 3.675 percent…
A: We take loans to buy expensive items like a car or a house which otherwise we cannot afford. The…
Q: A firm borrows $200,000 at 10 percent from a bank with a compensating balance of 20 percent. What is…
A: In this question, we are required to determine the effective rate of interest.
Q: For 9 years, Janet saved $500 at the beginning of every month in a fund that earned 4.5% compounded…
A: We need to use use future value of annuity due( payment due at beginning of period) formula to…
Q: A defined benefit pension plan has the following funding formula: 2.5% * years of service final…
A: In this question, we are required to determine the expected retirement benefit from the pension…
Q: Friendly's Quick Loans, Incorporated, offers you $7.50 today but you must repay $9.85 when you get…
A: We need to use effective annual return (EAR) formula below.EAR =( 1 +Periodic interest rate)number…
Q: If the required return on this stock is 9 percent, what is the current share price?
A: The constant growth model is a stock valuation method used in finance to determine a stock's…
Q: Royal Dutch Shell PLC (ticker RDS) is a large, multinational oil company. The firm is preparing to…
A: When an asset is put into use, its value decreases due to wear and tear. This wear and tear cost of…
Q: Kinky Copies may buy a high-volume copier. The machine costs $110,000 and this cost can be fully…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: A horticulturist has just set up vegetable cultivation in a greenhouse where he grows peppers and…
A: The objective of the question is to determine the optimal production of peppers and tomatoes that…
Q: ..An investor owns a portfolio that includes a risk-free asset and shares of Amazon. The risk-free…
A: In this question, we are required to determine the expected return on the portfolio.
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: The rate that a business should pay, on average, to each of its security holders in order to fund…
Q: Assume today is December 31, 2018. Imagine Works Inc. just paid a dividend of $1.25 per share at the…
A: PRICE OF STOCK = Price of stock = Present Value of Dividends +Present Value of Terminal FlowInitial…
Q: On January 1, the total market value of the Tysseland Company was $60 million. During the year, the…
A: Capital structure represents the mix used by the firm for procuring funds from different sources of…
Q: A corporation creates a sinking fund in order to have $790,000 to replace some machinery in 12…
A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount by…
Q: Lorna Hall's real estate tax of $2,010.88 was due on December 14, 2022. Lorna lost her job and could…
A: Taxes were to be paid on December 14, 2022 but are actually paid on February 27, 2023. So, Number of…
Q: Compex Ltd. has 500 million shares outstanding and pays interest of $125 million per year. Its EBIT…
A: EPS is also known as earnign per share. It is that amount which is earned by the investor in his…
Q: A borrower is purchasing a property for $180,000 and can choose between two possible loan…
A: Loan alternatives refer to the options that are available for the borrower to avail debt. He/she can…
Q: Use the Black-Scholes model to find the price for a call option with the following inputs: (1)…
A: Current stock price = $32Strike price = $37Time to export = 3 months Risk-free rate = 6%Variance =…
Q: abrina just took out a car loan with a stated rate of 9.12 %. at that time the inflation rate was…
A: Nominal rate = 9.12%Inflation rate=3.46%
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
- On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $820,000 and has an expected useful life of eight years. Its normal sales price is $820,000. The residual value after six years is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The Interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Calculate the amount of the annual lease payments. (Enter amounts as positive values rounded to the nearest whole dollar.) Guaranteed Residual Value Table or calculator function: Amount to be recovered (fair value) Guaranteed residual value Amount to be recovered through periodic lease payments Lease Payment Table or calculator function: Amount of each annual lease payment. n= j= n= Present value Lease…On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $860,000 and has an expected useful life of seven years. Its normal sales price is $860,000. The residual value after five years is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Calculate the amount of the annual lease payments.
- On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $860,000 and has an expected useful life of seven years. Its normal sales price is $860,000. The residual value after five years is $200,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Calculate the amount of the annual lease payments. (Round your answers to the nearest whole number.)On January 1, James Industries leased equipment to a customer for a four-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $700,000 and has an expected useful life of six years. Its normal sales price is $700,000. The residual value after four years, guaranteed by the lessee, is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. Collectibility of the remaining lease payments is reasonably assured, and there are no material cost uncertainties. The interest rate is 5%. Calculate the amount of the annual lease payments.On January 1, James Industries leased equipment to a customer for a four-year period, at which time possessionof the leased asset will revert back to James. The equipment cost James $700,000 and has an expected useful lifeof six years. Its normal sales price is $700,000. The residual value after four years is $100,000. Lease paymentsare due on December 31 of each year, beginning with the first payment at the end of the first year. The interestrate is 5%. Calculate the amount of the annual lease payments.
- On January 1, Keunho Industries leased equipment to a customer for a four-year perlod, at which time possession of the leased asset will revert back to Keuntia The equipment cost Keunho $270,000 and has an expected useful life of six years. Its normal sales price is $270,000. The residual value after four years is $100,000 Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 9% What is the amount of the annual lease payments? Note: Round your answer to the nearest whole dollar amount. The present value of $t: n=4,/9% is 0.70843 The present value of an ordinary annuity of $1: n=4, / -9% is 3.23972. The present value of an annuity due of $1: n=4./=9% is 3.53129. Multiple Choice O $54,166 $56,398 4Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…Telor, a private company that follows ASPE, entered into a lease agreement with Global Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Telor signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Global Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Telor does not know the implicit rate of the lease; Telor's incremental borrowing rate is 10%. Telor uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Telor. Round amounts to the nearest dollar.
- On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee? Note: Use tables, Excel, or a financial calculator. Enter your answer in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee?On 31 December 20X1, Lessee Ltd. entered into a lease agreement by which Lessee leased a jutling machine for six years. Annual lease payments are $20,000, payable at the beginning of each lease year (31 December). At the end of the lease, possession of the machine will revert to the lessor. The normal economic life for this type of machine is 8 to 10 years. At the time of the lease agreement, jutling machines could be purchased for approximately $90,000 cash. Equivalent financing for the machine could have been obtained from Lessee's bank at 14%. Lessee uses straight-line depreciation for its jutling machines. Required: 1. Prepare a lease liability amortization table for the lease. 2. Prepare all journal entries relating to the lease and the leased asset for 20X1, 20X2, and 20X3. 3. How would the amounts relating to the leased asset and lease liability be shown on Lessee's statement of financial position at 31 December 20X4?