Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease...

  

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Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,343, based on an interest rate of 12 %, are to be made every December 31, beginning with December 31, 2017. PV of Annuity of $1. Required: Refer to the table above for present value factors. 1. Assume that the lease is treated as an operating lease. a. Will the value of the forklift appear on Koffman's balance sheet? No ✔ b. What account will indicate that lease payments have been made? Lease expense Feedback Check My Work 2. Assume that the lease is treated as a capital lease or finance lease. a. Identify and analyze the effect when the lease is signed. Investing and Financing Leased Asset Increase, Lease Obligation Increase Balance Sheet only Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar. Assets Leased Asset Balance Sheet Liabilities Lease Obligation Stockholders' + + Equity No Entry Revenues Explain why the value of the leased asset is not recorded at $5,372 ($1,343 x 4). The leased asset should be reported at the present value Income Statement No Entry of the payments which is $ Expenses not at $ = Net Income b. Identify and analyze the effect of the first lease payment on December 31, 2017. Operating and Financing ▼ Cash Decrease, Lease Obligation Decrease, Interest Expense Increase Activity Accounts Statement(s) Balance Sheet and Income Statement How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar. Cash Assets = Balance Sheet Liabilities Lease Obligation + Stockholders' Equity No Entry c. Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar. $ Revenues Income Statement Interest Expense d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar. Current liability portion Long-term liability portion $ Expenses = Net Income TABLE 9-4 Present Value of Annuity of $1 (N) Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 24 26 28 30 2% 3% 4% 10% 98039 97087 96154 95238 94340 .93458 92593 .90909 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.73554 2.88388 2.82861 2.77509 2.72325 2.67301 2.62432 2.57710 2.48685 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.16987 3.03735 4.71346 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 3.79076 3.60478 5.60143 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.35526 4.11141 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 4.86842 4.56376 7.32548 7.01969 6.73274 6.46321 6.20979 5.97130 5.74664 5.33493 4.96764 8.16224 7.78611 7.10782 6.80169 6.51523 6.24689 5.75902 5.32825 8.98259 8.53020 7.72173 7.36009 7.02358 6.71008 6.14457 5.65022 7.88687 7.13896 6.49506 5.93770 7.53608 6.81369 6.19437 7.49867 7.94269 8.35765 8.74547 8.24424 7.36669 6.62817 7.90378 7.10336 6.42355 6.81086 9.78685 9.25262 8.76048 8.30641 10.57534 9.95400 9.38507 8.86325 8.38384 11.34837 10.63496 9.98565 9.39357 8.85268 12.10625 11.29607 10.56312 9.89864 9.29498 12.84926 11.93794 11.11839 10.37966 9.71225 13.57771 12.56110 11.65230 10.83777 10.10590 14.29187 13.16612 12.16567 11.27407 10.47726 14.99203 13.75351 12.65930 11.68959 10.82760 15.67846 14.32380 13.13394 13.59033 14.45112 6.97399 9.10791 8.55948 7.60608 9.44665 8.85137 7.82371 9.76322 9.12164 10.05909 9.37189 10.33560 9.60360 8.02155 7.11963 8.20141 7.24967 12.08532 11.15812 8.36492 7.36578 16.35143 14.87747 12.46221 11.46992 10.59401 9.81815 8.51356 7.46944 17.65805 15.93692 13.16300 12.04158 11.06124 10.20074 8.77154 7.64465 18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 8.98474 7.78432 20.12104 17.87684 15.98277 14.37519 13.00317 21.28127 18.76411 16.66306 14.89813 13.40616 22.39646 19.60044 17.29203 15.37245 13.76483 10.52876 11.82578 10.80998 9.16095 7.89566 12.13711 11.05108 9.30657 7.98442 12.40904 11.25778 9.42691 8.05518 7.43533 8.11090 5% 6% 7% 8% 12% .89286 1.69005 2.40183 15% 86957 1.62571 2.28323 2.85498 3.35216 3.78448 4.16042 4.48732 4.77158 5.01877 5.23371 5.42062 5.58315 5.72448 5.84737 5.95423 6.04716 6.12797 6.19823 6.25933 6.35866 6.43377 6.49056 6.53351 6.56598 Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,343, based on an interest rate of 12 %, are to be made every December 31, beginning with December 31, 2017. PV of Annuity of $1. Required: Refer to the table above for present value factors. 1. Assume that the lease is treated as an operating lease. a. Will the value of the forklift appear on Koffman's balance sheet? No ✔ b. What account will indicate that lease payments have been made? Lease expense Feedback Check My Work 2. Assume that the lease is treated as a capital lease or finance lease. a. Identify and analyze the effect when the lease is signed. Investing and Financing Leased Asset Increase, Lease Obligation Increase Balance Sheet only Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar. Assets Leased Asset Balance Sheet Liabilities Lease Obligation Stockholders' + + Equity No Entry Revenues Explain why the value of the leased asset is not recorded at $5,372 ($1,343 x 4). The leased asset should be reported at the present value Income Statement No Entry of the payments which is $ Expenses not at $ = Net Income b. Identify and analyze the effect of the first lease payment on December 31, 2017. Operating and Financing ▼ Cash Decrease, Lease Obligation Decrease, Interest Expense Increase Activity Accounts Statement(s) Balance Sheet and Income Statement How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar. Cash Assets = Balance Sheet Liabilities Lease Obligation + Stockholders' Equity No Entry c. Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar. $ Revenues Income Statement Interest Expense d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar. Current liability portion Long-term liability portion $ Expenses = Net Income TABLE 9-4 Present Value of Annuity of $1 (N) Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 24 26 28 30 2% 3% 4% 10% 98039 97087 96154 95238 94340 .93458 92593 .90909 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.73554 2.88388 2.82861 2.77509 2.72325 2.67301 2.62432 2.57710 2.48685 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.16987 3.03735 4.71346 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 3.79076 3.60478 5.60143 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.35526 4.11141 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 4.86842 4.56376 7.32548 7.01969 6.73274 6.46321 6.20979 5.97130 5.74664 5.33493 4.96764 8.16224 7.78611 7.10782 6.80169 6.51523 6.24689 5.75902 5.32825 8.98259 8.53020 7.72173 7.36009 7.02358 6.71008 6.14457 5.65022 7.88687 7.13896 6.49506 5.93770 7.53608 6.81369 6.19437 7.49867 7.94269 8.35765 8.74547 8.24424 7.36669 6.62817 7.90378 7.10336 6.42355 6.81086 9.78685 9.25262 8.76048 8.30641 10.57534 9.95400 9.38507 8.86325 8.38384 11.34837 10.63496 9.98565 9.39357 8.85268 12.10625 11.29607 10.56312 9.89864 9.29498 12.84926 11.93794 11.11839 10.37966 9.71225 13.57771 12.56110 11.65230 10.83777 10.10590 14.29187 13.16612 12.16567 11.27407 10.47726 14.99203 13.75351 12.65930 11.68959 10.82760 15.67846 14.32380 13.13394 13.59033 14.45112 6.97399 9.10791 8.55948 7.60608 9.44665 8.85137 7.82371 9.76322 9.12164 10.05909 9.37189 10.33560 9.60360 8.02155 7.11963 8.20141 7.24967 12.08532 11.15812 8.36492 7.36578 16.35143 14.87747 12.46221 11.46992 10.59401 9.81815 8.51356 7.46944 17.65805 15.93692 13.16300 12.04158 11.06124 10.20074 8.77154 7.64465 18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 8.98474 7.78432 20.12104 17.87684 15.98277 14.37519 13.00317 21.28127 18.76411 16.66306 14.89813 13.40616 22.39646 19.60044 17.29203 15.37245 13.76483 10.52876 11.82578 10.80998 9.16095 7.89566 12.13711 11.05108 9.30657 7.98442 12.40904 11.25778 9.42691 8.05518 7.43533 8.11090 5% 6% 7% 8% 12% .89286 1.69005 2.40183 15% 86957 1.62571 2.28323 2.85498 3.35216 3.78448 4.16042 4.48732 4.77158 5.01877 5.23371 5.42062 5.58315 5.72448 5.84737 5.95423 6.04716 6.12797 6.19823 6.25933 6.35866 6.43377 6.49056 6.53351 6.56598

Answer rating: 100% (QA)

The annual lease payment is 1343 Interest rate is 12 PV factor value at 12 for 4 periods is 3037 Present Value of lease payments can be computed by us... View the full answer