December 31, 2013, Corporation A leased equipment to Company B for a five-year period. The annual lease payment, excluding executory costs is $42,000. The interest rate for this lease is 10%. The payments are due on December 31 of each year. The first payment was made on December 31, 2013. The normal cash price for this type of equipment is $150,000 while the cost to Corporation A was $118,000. For the year ended December 31, 2013, by what amount will Corporation A's pretax earnings increase from this lease?
December 31, 2013, Corporation A leased equipment to Company B for a five-year period. The annual lease payment, excluding executory costs is $42,000. The interest rate for this lease is 10%. The payments are due on December 31 of each year. The first payment was made on December 31, 2013. The normal cash price for this type of equipment is $150,000 while the cost to Corporation A was $118,000. For the year ended December 31, 2013, by what amount will Corporation A's pretax earnings increase from this lease?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:December 31, 2013, Corporation A leased equipment to
Company B for a five-year period. The annual lease payment,
excluding executory costs is $42,000. The interest rate for this
lease is 10%. The payments are due on December 31 of each
year. The first payment was made on December 31, 2013. The
normal cash price for this type of equipment is $150,000 while
the cost to Corporation A was $118,000. For the year ended
December 31, 2013, by what amount will Corporation A's pretax
earnings increase from this lease?
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