FREE Trial

Financial Statement Impact of a Lease On January 1, 2010, Kiger Manufacturing Company leased a factory machine

Question:

Financial Statement Impact of a Lease On January 1, 2010, Kiger Manufacturing Company leased a factory machine for six years. Annual payments of $21,980 are to be made every December 31 beginning December 31, 2010. Interest expense is based on a rate of 9%. The present value of the minimum lease payments is $98,600 and has been determined to be greater than 90% of the fair market value of the machine on January 1, 2010. Kiger uses straight-line depreciation on all assets.


Required

1. Prepare a table similar to Exhibit 10-7 to show the six-year amortization of the lease obligation.

2. Identify and analyze the effect of the lease transaction on January 1, 2010.

3. Identify and analyze the effect of all transactions on December 31, 2011 (the second year of the lease).

4. Prepare the balance sheet presentation as of December 31, 2011, for the leased asset and the lease obligation.


Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 68% (16 reviews)

1 Col 1 Col 2 Col 3 Col 4 Interest Reduction of Lease Expense Obligation Lease Date Payment 9 Col 1 ...View the full answer


answer-question-section
Answered By
tutor-profile-image
Jacob Festus
I am a professional Statistician and Project Research writer. I am looking forward to getting mostly statistical work including data management that is analysis, data entry using all the statistical software’s such as R Gui, R Studio, SPSS, STATA, and excel. I also have excellent knowledge of research and essay writing. I have previously worked in other Freelancing sites such as Uvocorp, Essay shark, Bluecorp and finally, decided to join the solution inn team to continue with my explicit work of helping dear clients and students achieve their Academic dreams. I deliver, quality and exceptional projects on time and capable of working under high pressure.
4.90+ 1252+ Reviews 2844+ Question Solved
Related Book For  book-img-for-question
Using Financial Accounting Information The Alternative to Debits and Credits

Using Financial Accounting Information The Alternative to Debits and Credits

ISBN: 978-1133161646

7th Edition

Authors: Gary A. Porter, Curtis L. Norton

See More Books
Question Posted:
See More Questions

Related Video

In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

Students also viewed these Accounting questions

Income Taxation Of Estates And Trusts 14th Edition - ISBN: 0872240908 - Free Book