Northstar Corp. wants to lease machinery costing $60,000 from Callaho Inc. using a capital lease. The lease would begin on May 1, 2017, and Northstar Corp. would pay all executory costs and assume all risks and rewards of ownership. Northstar Corp. has an incremental borrowing rate of 8%, and would like the lease over 4 years. The machinery is not expected to have any residual value after that time period. Northstar Corp.'s year end is December 31, amortizes depreciation using the straight-line method, and records part-year depreciation per month, in the year the asset is acquired.

Callaho Inc. agrees with Northstar Corp.'s four-year-term request, and offers beginning-of-the-year lease payments of $15,100, or end-of-the-year payments of $16,700.

Make sure your final answer(s) are accurate to 2 decimal places.

a) Calculate the NPV (net present value) with payments at the beginning of each period.

b) Calculate the NPV with payments at the end of each period.

c) Complete the amortization table below for payments at the beginning.

year	payment	Interest at 8%	principal	Balance
2017
2017
2018
2019
2020

d) Complete the amortization table below for payments at the end.

year	payment	Interest @8%	principal	Balance
2017
2018
2019
2020
2021

e) Which lease involves more interest and by how much?

The lease with payments at the(select one)of each year has,,,,fill the blank,,,, more interest.

f) Provide journal entries for the lessee for 2017 assuming that Callaho Inc. accepts the lease with the $16,700 payments

Answer rating: 100% (QA)

NPVLease paymentPVAD of 1 at 8 for 4 years15100357710 a54... View the full answer