Delaney leases an automobile with a fair value of P10,000 from Simon motors on
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Delaney leases an automobile with a fair value of P10,000 from Simon motors on
the following terms:
- Non-cancellable term of 50 months
- Rental of P200 per month (at the beginning of each month). The PV factor at 0.5% per month is 44.3635.
- Delaney guarantees a residual value of P1,180 (the present value at 0.5% per month is P920). Delaney expects the probable residual value to be P1,180 at the end of the lease term.
- Estimated economic life of the automobile is 60 months.
- Delaney’s incremental borrowing rate if 6%. Simon’s implicit rate is unknown.
1. What is the present value of the lease payments to determine the lease liability?
2. How much
3. Suppose that instead of P1,180, Delaney expects the residual value to be only P500. How much will be the PV of lease payments?
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- Delaney leases an automobile with a fair value of P10,000 from Simon motors on the following terms: Non-cancellable term of 50 months Rental of P200 per month (at the beginning of each month). The PV factor at 0.5% per month is 44.3635. Delaney guarantees a residual value of P1,180 (the present value at 0.5% per month is P920). Delaney expects the probable residual value to be P1,180 at the end of the lease term. Estimated economic life of the automobile is 60 months. Delaney’s incremental borrowing rate if 6%. Simon’s implicit rate is unknown. Suppose that instead of P1,180, Delaney expects the residual value to be only P500. How much will be the PV of lease payments?Delaney AG leases an automobile with a fair value of €10,000 from Simon Motors, on the following terms. Non-cancelable term of 50 months. Rental of €200 per month (at the beginning of each month). (The present value at 0.5% per month is €8,873.) Delaney guarantees a residual value of €1,180 (the present value at 0.5% per month is €920). Delaney expects the probable residual value to be €1,180 at the end of the lease term. Estimated economic life of the automobile is 60 months.5. Delaney's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. Instructions What is the present value of the lease payments to determine the lease liability? Based on the original fact pattern, record the lease on Delaney's books at the date of commencement. Record the first month's lease payment (at commencement of the lease). Record the second month's lease payment. Record the first month's amortization on Delaney's books (assume straight-line). 4. Suppose…Munabhai
- ABC Inc. is considering leasing some equipment for 10 years with equal lease payments at the end of each year. The equipment would cost $200,000 to buy and would be depreciated straight-line over 10 years to a zero-salvage value. The applicable cost of debt is 10%. The lessee does not expect to owe taxes for the next 15 years while the lessor's tax rate is 21%. What is the Lessor's minimum acceptable lease payment? (Do not round your intermediate calculations. Round only your final answer to 2 decimal places, if necessary. Note: Your final answer must be in dollars without the $ sign at the beginning)Nu-Tek is considering leasing some equipment for 4 years with equal annual lease payments. The equipment would cost $74,000 to buy and would be depreciated straight-line over 4 years to a zero-salvage value. The actual salvage value is zero. The applicable pretax borrowing rate is 7.3 percent. The lessee does not expect to owe taxes for several years while the lessor's tax rate is 21 percent. What is the minimum lease payment that will be acceptable to both parties? (Do not round your intermediate calculations. Round only your final answer up to 2 decimal places, if necessary. Note: Your final answer must be in dollars without the $ sign at the beginning)Reynolds Construction (RC) needs a piece of equipment that costs $150,000. The equipment has an economic life of 3 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 7% with payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due at the end of the year. Assume RC chooses the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.) What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value. $ What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent. $ What will RC report as an interest expense at Year 1? Round your answer to the nearest cent.…
- Reynolds Construction (RC) needs a piece of equipment that costs $150,000. The equipment has an economic life of 3 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 7% with payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due at the end of the year. Assume RC chooses the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.) What will RC report as an amortization expense at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value. $ What will RC report as the lease liability at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value. $ What will RC report as the right-of-use asset at Year 1? Do…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.…Reynolds Construction (RC) needs a piece of equipment that costs $100,000. The equipment has an economic life of 2 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 10% with payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due at the end of the year. Assume RC chooses the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.) What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value. What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent. What will RC report as an interest expense at Year 1? Round your answer to the nearest cent. Enter your…
- Donald leases a new car by making a down payment of $2.900 and beginning-of- month payments of $280 for four years. If the lease amount of the car is $26,700 and Donald could buy the car for $14,700 at the end of the lease, what is the effective rate of interest of the car lease? Express the effective rate as a percentage to 3 decimal places. NOTE: Make PV positive Full solutions should be shown on separate sheets of paper. Submit your solutions. In addition, include the appropriate entries to solve this question using the TVM Solver as shown below. P/Y CY PV PMT FV Question 2 of 7 NOTE: Make PV positive Full solutions should be shown on separate sheets of paper. Submit your solutions. In addition, include the appropriate entries to solve this question using the TVM Solver as shown below. P/Y CY N I/Y PV PMT EV BGN/END (click to select) Enter "CPT" for the value that needs to be computed. Effective RateAssume a 10-year lease contract on some equipment with equal lease payments at the end of each year. The equipment would cost $200,000 to buy and would be depreciated straight-line over 10 years to a zero-salvage value. The applicable cost of debt is 10%. The lessee does not expect to owe taxes for the next 15 years while the lessor's tax rate is 21%. What is the Lessee's maximum acceptable lease payment?(A) Brock purchases equipment that has a fair value of $50,000. Brock pays $10,000 as a downpayment, and also issues a note with principal of $60,000, and pays interest of 1% annually, with the principal due in 10 years. What is the market rate for the note? (round to the nearest .1%) N= I= PMT = FV = PV = Work (if necessary) Answer