1. The company can purchase the equipment by borrowing $218,000 with a 25-month, 12% installment note. Payments of $9,898.67 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 25-month lease for the equipment by agreeing to pay $7,900.78 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company’s amount of reported debt, and by how much? (Round other intermediate and final answers to the nearest whole dollar amount.) 4. Suppose the equipment has a total value of $123,000 at the end of the 25-month period, which option (purchasing with installment note or leasing) would likely be better?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. The company can purchase the equipment by borrowing $218,000 with a 25-month, 12% installment note. Payments of $9,898.67 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment.

2. The company can sign a 25-month lease for the equipment by agreeing to pay $7,900.78 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company’s amount of reported debt, and by how much? (Round other intermediate and final answers to the nearest whole dollar amount.)

4. Suppose the equipment has a total value of $123,000 at the end of the 25-month period, which option (purchasing with installment note or leasing) would likely be better?

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