Question

On June 1, 2017, Zealand Corp. (Zealand) signed a six-year lease for heavy equipment. The lease requires Zealand to make annual lease payments of $200,000 on May 31 of each year beginning in 2018.
The lease is to be treated as a capital (finance) lease.

Required:
a. Indicate the amount that would be recorded for heavy equipment and for the lease liability on June 1, 2017, assuming the appropriate interest rate for the lease was:
i. 8 Percent
ii. 10 percent
iii. 12 percent
b. Indicate the annual depreciation expense for the heavy equipment, assuming straight-line depreciation over six years and assuming the appropriate interest rate for the lease was:
i. 8 percent
ii. 10 percent
iii. 12 percent
c. Indicate the interest expense pertaining to the lease in the fiscal year ended May 31, 2018, assuming the appropriate interest rate for the lease was:
i. 8 percent
ii. 10 percent
iii. 12 percent



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  • CreatedFebruary 26, 2015
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