Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 5, Problem 5.11P
Solving for unknown lease payment
• LO6–8, LO6–9
Benning Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Benning. The machine has a cash price of $800,000. Benning wants to be reimbursed for financing the machine at an 8% annual interest rate.
Required:
1. Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately.
2. Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement.
3. Determine the required lease payment if the first of 10 annual payments will be made immediately and Benning will be able to sell the machine to another customer for $50,000 at the end of the 10-year lease.
[This is a variation of P 6-11 focusing on compounding periods of varying length.]
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MM-6
An office equipment representative has a machine for sale or lease. If you buy the
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LO M.8
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0.909
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The interest rate implicit in this lease is approximately:
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Problem 2
On January 1, 2020, RAGASA Company leased a building with the following information:
Annual lease payments
Purchase option that is not reasonably certain to be exercised
Initial direct cost paid
Lease incentives received
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Discounted amount of restoring the building as required by
P 2,000,000
600,000
700,000
300,000
200,000
400,000
contract
5 years
8 years
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Useful life of building
| Implicit interest rate
First lease payment
8%
December 31, 2020
a) What amount should be reported as lease liability on December 31, 2020?
b) What is the depreciation for the year 2020?
||
II
Problem 3
On January 1, 2022, Grab Services, Inc. leased delivery trucks from Henri Industries.
The lease agreement for the P3,000,000 (fair value and present value of the lease
payments) delivery trucks specified four equal payments at the end of each year. The
useful life of the delivery trucks was expected to be 8 years with no residual value.
The implicit rate on the lease was 10%.
27. Determine the annual lease payment to be made by Grab Services?
Chapter 5 Solutions
Intermediate Accounting, 10 Ed
Ch. 5 - Prob. 5.1QCh. 5 - Explain compound interest.Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - What is an annuity?Ch. 5 - Explain the difference between an ordinary annuity...Ch. 5 - Prob. 5.9QCh. 5 - Prepare a time diagram for the present value of a...
Ch. 5 - Prepare a time diagram for the present value of a...Ch. 5 - What is a deferred annuity?Ch. 5 - Assume that you borrowed 500 from a friend and...Ch. 5 - Compute the required annual payment in Question...Ch. 5 - Explain how the time value of money concept is...Ch. 5 - Prob. 5.1BECh. 5 - Prob. 5.2BECh. 5 - Prob. 5.3BECh. 5 - Present value; single amount LO63 John has an...Ch. 5 - Present value; solving for unknown; single amount ...Ch. 5 - Future value; ordinary annuity LO66 Leslie...Ch. 5 - Future value; annuity due LO66 Refer to the...Ch. 5 - Prob. 5.8BECh. 5 - Prob. 5.9BECh. 5 - Prob. 5.10BECh. 5 - Solve for unknown; annuity LO68 Kingsley Toyota...Ch. 5 - Price of a bond LO69 On December 31, 2018,...Ch. 5 - Lease payment LO69 On September 30, 2018,...Ch. 5 - Prob. 5.1ECh. 5 - Future value; single amounts LO62 Determine the...Ch. 5 - Prob. 5.3ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.10ECh. 5 - Deferred annuities LO67 Required: Calculate the...Ch. 5 - Solving for unknowns; annuities LO68 For each of...Ch. 5 - Solving for unknown annuity amount LO68 Required:...Ch. 5 - Prob. 5.15ECh. 5 - Price of a bond LO69 On September 30, 2018, the...Ch. 5 - Price of a bond; interest expense LO69 On June...Ch. 5 - Prob. 5.18ECh. 5 - Prob. 5.19ECh. 5 - Lease payments LO69 On June 30, 2018,...Ch. 5 - Lease payments; solve for unknown interest rate ...Ch. 5 - Analysis of alternatives LO63, LO67 Esquire...Ch. 5 - Analysis of alternatives LO63, LO67 Harding...Ch. 5 - Investment analysis LO63, LO67 John Wiggins is...Ch. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Deferred annuities LO67 On January 1, 2018, the...Ch. 5 - Prob. 5.8PCh. 5 - Noninterest-bearing note; annuity and lump-sum...Ch. 5 - Prob. 5.10PCh. 5 - Solving for unknown lease payment LO68, LO69...Ch. 5 - Solving for unknown lease payment; compounding...Ch. 5 - Lease v s. buy alternatives LO63, LO67, LO69...Ch. 5 - Prob. 5.14PCh. 5 - Prob. 5.15PCh. 5 - Prob. 5.1DMPCh. 5 - Prob. 5.2DMPCh. 5 - Prob. 5.3DMPCh. 5 - Prob. 5.4DMPCh. 5 - Judgment Case 65 Replacement decision LO63, LO67...Ch. 5 - Prob. 5.6DMPCh. 5 - Prob. 5.7DMP
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