1. The company can purchase the equipment by borrowing $220,000 with a 23-month, 12% installment note. Payments of $10,754.88 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 23-month lease for the equipment by agreeing to pay $8,652.79 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. 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? 4. Suppose the equipment has a total value of $102,000 at the end of the 23-month period, which option (purchasing with installment note or leasing) would likely be better?

1. The company can purchase the equipment by borrowing $220,000 with a 23-month, 12% installment note. Payments of $10,754.88 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 23-month lease for the equipment by agreeing to pay $8,652.79 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. 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? 4. Suppose the equipment has a total value of $102,000 at the end of the 23-month period, which option (purchasing with installment note or leasing) would likely be better?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 1PA: On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10%...

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