On June 30, 2016, Blue, Inc., leased a machine from Big Leasing Corporation. The lease agreement qualifies
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Question:
On June 30, 2016, Blue, Inc., leased a machine from Big Leasing Corporation. The lease agreement qualifies as a capital lease and calls for Blue to make semiannual lease payments of $281,454 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016. Blue’s incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
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1. | Determine the present value of the lease payments at June 30, 2016, (to the nearest $000) that Blue uses to record the leased asset and lease liability. | ||
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2. | What would be the pretax amounts related to the lease that Blue would report in its balance sheet at December 31, 2016? | ||||||||||||
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3. | What would be the pretax amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2016?
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Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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