A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000...
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A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $235,000. (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.) Required: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization through the first payment on January 1, 2017. c. What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required A Required B Required C What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)? (Input decreases to income as negative amounts. Round your answers to nearest whole number.) Pretax impact on income related to the lease: Sales revenue Interest revenue 10,824 Total pretax impact on income $ 10,824 A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $235,000. (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.) Required: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization through the first payment on January 1, 2017. c. What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required A Required B Required C What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)? (Input decreases to income as negative amounts. Round your answers to nearest whole number.) Pretax impact on income related to the lease: Sales revenue Interest revenue 10,824 Total pretax impact on income $ 10,824
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Solution a present value of the lease upon the leases inception 50000 Cumulative PV factor at 5 fo... View the full answer
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
Posted Date:
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