anatee Corporation bought new equipment and agreed to pay for it in five equal annual installments of $10,000 beginning at the end of next year. Assuming that a prevailing interest rate of 10% applies to this contract, how much should Manatee record as the cost of the equipment?

anatee Corporation bought new equipment and agreed to pay for it in five equal annual installments of $10,000 beginning at the end of next year. Assuming that a prevailing interest rate of 10% applies to this contract, how much should Manatee record as the cost of the equipment?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Flounder Equipment Leasing Company leased equipment to Pharoah Healthcare System on January 1, 2025, for a four- year period. Equal annual payments under the lease are $560000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Flounder Equipment Leasing and known to Pharoah Healthcare is 8%. Pharoah's incremental borrowing rate is 11%. The cost of the equipment on Flounder Equipment Leasing accounting records was $680000. Assuming that the lease is appropriately recorded as an operating lease, what is the amount of profit on the sale that Flounder Equipment Leasing would record for the year ended December 31, 2025? 8%, 4 periods 11%, 4 periods $1323176 $509091 O $629091 $0 PV Annuity Due PV Ordinary Annuity PV Single Sum 3.57710 0.73503 3.44371 3.31213 3.10245 0.65873
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Lessing, which routinely finances equipment for other firms at an annual Interest rate of 4%. The contract calls for four rent payments of $13,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $97,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. (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.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lesse. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your answers in the tabs…
Pharoah Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Pharoah. The six-year lease requires payment of $162000 at the beginning of each year, including $24200 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor’s implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Pharoah should record the leased asset at $660171. $808819. $776108. $687995.
Royal Manufacturing leased a piece of equipment for $3,650 payable at the start of every month for three years. If Royal pays 6% compounded semiannually on its medium-term debt, what initial lease liability would the company record for this equipment?
Pepper, Inc. agrees to lease equipment from the Blue Corporation for 10 years at $25,000 at the end of each year. The equipment has a fair value of $175,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of $10,000. In addition to the lease payments, Pepper will pay $5,000 per year for a malntenance agreement. Pepper can finance this lease with its bank at a 12% rate. The lessor's Implicit lease rate, known to the lessee, Is 10%. The lessor and the lessee use ASC 842 guldelines for lease accounting. Present value Interest factors are: 10% 12% PV factor of $1 for 10 periods PV factor for ordinary annuity for 10 periods 0.38554 0.32197 6.14457 5.65022 The Pepper lease Is a(n): Multiple Choice short-term lease because the lease value is less than the falr value of the asset. finance lease because the lease term covers the major part of the economlc life of the asset. operating lease because the asset reverts to Blue at the end of the lease.…
Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account…
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Lessing, which routinely finances equipment for other firms at an annual Interest rate of 4%. The contract calls for four rent payments of $13,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $97,000 and were expected to have a useful life of five years with no residual value. Both firma record amortization and depreciation semiannually. (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.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your answers in the tabs…
American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 10%. (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.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Prepare the appropriate entries related to the lease…
On 1 October 20X3, Fresco acquired an item of plant under a five-year finance lease agreement. The plant had a cash purchase cost of $25 million. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $2 million and annual rentals of $6 million paid on 30 September each year for five years. What would be the current liability for the leased plant in Fresco's statement of financial position as at 30 September 20X4? A $19,300,000 B $4,070,000 C $5,000,000 D $3,850,000
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $468,683 over a five-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $3.8 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
Shoreline sells a piece of equipment to a corporate customer for $500,000. The cost of the equipment to Shoreline is $375,000. The terms of the sale call for the customer to make equal annual payments over the next three years, with the first payment due 1 year from now. APR is 9%. Variable consideration is already taken into account. Use the following tables to help you amortize and determine revenue and interest on the contract. Under the Installment method, how much gross profit will Shoreline recognize in Year 1? (to the nearest dollar) $0 $45,000 O $38,131 $97,774
Bravo Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Bravo. The machine has a cash price of $780,000. Bravo wants to be reimbursed for financing the machine at a 12% annual interest rate over the five-year lease term.