On January 2, 2019, Charminster Corporation leased six computers for use in its engineering department. The lease period is five years and the estimated economic life of the leased property is six years. The lease does not contain automatic title transfer and a bargain purchase option. Annual lease payments are payable in advance every January 2 in the amount of P90,000. The incremental borrowing rate for Charminster Corporation is 12% and the implicit interest rate (known to Charminster) is 10%. The company uses straight-line depreciation for this type of equipment. (Use two decimal places for the PV factors) 1. What is the capitalized cost of the right of use asset? 2. How much is the interest expense

On January 2, 2019, Charminster Corporation leased six computers for use in its engineering department. The lease period is five years and the estimated economic life of the leased property is six years. The lease does not contain automatic title transfer and a bargain purchase option. Annual lease payments are payable in advance every January 2 in the amount of P90,000. The incremental borrowing rate for Charminster Corporation is 12% and the implicit interest rate (known to Charminster) is 10%. The company uses straight-line depreciation for this type of equipment. (Use two decimal places for the PV factors) 1. What is the capitalized cost of the right of use asset? 2. How much is the interest expense

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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On January 2, 2019, Charminster Corporation leased six computers for use in its engineering department. The lease period is five years and the estimated economic life of the leased property is six years. The lease does not contain automatic title transfer and a bargain purchase option. Annual lease payments are payable in advance every January 2 in the amount of P90,000. The incremental borrowing rate for Charminster Corporation is 12% and the implicit interest rate (known to Charminster) is 10%. The company uses straight-line depreciation for this type of equipment. (Use two decimal places for the PV factors) 1. What is the depreciation expense of the right of use assets for the year 2019? 2. Assume tgat the lessee guarantees a residual value of P30, 000 at the end of the lease term. What is the depreciation expense for 2019? 3. Independent of assumption in 2. Assume that the lease provides for an option to the lessee to purchase the leased assets at a bargain price of P30, 000 at the…
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