A firm has a lease that has rent payments for three years of $6,000 each year....
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A firm has a lease that has rent payments for three years of $6,000 each year. The firms borrowing rate on secured debt is 5%. The tax rate is 25% The lease is classified as an OPERATING LEASE. Note: GAAP stands for generally accepted accounting principles We can say that (show work) a) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one b) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one c) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be approximately $6.263 in year one. d) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,413 in year one A firm has a lease that has rent payments for three years of $6,000 each year. The firms borrowing rate on secured debt is 5%. The tax rate is 25% The lease is classified as an OPERATING LEASE. Note: GAAP stands for generally accepted accounting principles We can say that (show work) a) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one b) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one c) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be approximately $6.263 in year one. d) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,413 in year one
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To calculate the initial operating liability for an operating lease we can use the present value of ... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation
ISBN: 978-0324302950
6th edition
Authors: Clyde P. Stickney
Posted Date:
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