ASSIGNMENT $4$

Problem $1.$

Is the total expense of a lease over its entire life the same for operating and finance leases? What about for any given year within the lease life?

Problem $2.$

The firm signs a lease on a machine with the following information:

Lease duration $-8$ years

Economic life of machine $=10$ ycars

The discount rate used to calculate the PV $=10\%$

Payment frequency; once a year at the end of the year

Lease payment amount: $$100,000$ per year

a$.$ What will be reconded at the inception if this is a Finance Lease?

$\backslash$table$[[$Assets$,=,$Liabilities, $,$Equity,,Sales,$-,$Expenses,Profit$],[,,,,,,,,,],[,,,,,,,,,]]$

b$.$ What will be recorded at the first annual payment if this is a Finance Lease $($assume no quarterly adjustments for simplicity$)?$

$\backslash$table$[[$Assets$,=,$Liabilities, $,$Equity,,Sales,$-,$Expesses,Profit$],[,,,,,,,,,],[,,,,,,,,,]]$

c$.$ What will be reconded at inception if this is an Operating Lease?

$\backslash$table$[[$Assets$,-,$Liabilities, $,$Equity,,Sales,$-,$Expenses,$-$ Profit$],[,,,,,,,,,],[,,,,,,,,,]]$

d$.$ What will be reconded at the first annual payment if this is an Operating Lease $($assume no quarterly adjustments for simplicity$)?$

$\backslash$table$[[$Assets$,-,$Liabilities, $,$Equity,,Sales,$-,$Expenses,$-,$Profit$],[,,,,,,,,,,],[,,,,,,,,,,]]$