The allocation of total consideration into computer servers and consulting and training service. Given information: Stand alone price of Server is $850,000 Stand alone price of consulting and training is $150,000. Lease rent per annum is $300,000. Variable payment is $7,000 on an average based on use of server.

Question

Want to see the full answer?

Answer 1

Question

Chapter 18, Problem 18.1E

To determine

The allocation of total consideration into computer servers and consulting and training service.

Given information:

Stand alone price of Server is $850,000

Stand alone price of consulting and training is $150,000.

Lease rent per annum is $300,000.

Variable payment is $7,000 on an average based on use of server.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Callaway Golf Co. leases telecommunications equipment from Photon Company. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair value at the commencement of the lease of $150,000, an estimated useful life of 8 years, and a guaranteed residual value at the end of the lease of $15,500. Photon 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?

Atlanta Capital Leasing Company (ACLC) leases tractors to construction companies. The firm wants to set a three-year lease payment schedule for a tractor purchased at $53,000 from the equipment manufacturer. The asset is classified as a five-year MACRS property. The tractor is expected to have a salvage value of $22,000 at the end of three years of rental. ACLC will require the lessee to make a security deposit of $1,500 that is refundable at the end of the lease term. ACLC's marginal tax rate is 35%. If ACLC wants an after-tax return of 10%, what lease payment schedule should be set'?

Bravo Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Bravo. The machine has a cash price of $800,000. Bravo wants to be reimbursed for financing the machine at an 8% annual interest rate. Required: Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately. Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement. Determine the required lease payment if the first of 10 annual payments will be made immediately and Bravo will be able to sell the machine to another customer for $50,000 at the end of the 10-year lease.