Dunbar Corporation can either purchase an asset for $38,000, which will have no value after 13 years, or lease the same for 13 years with an annual lease payment of $4,458, due at the end of each year. The company's cost of debt is 8%. The IRS classifies the lease as a non-tax- oriented lease. What is the net advantage of leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.

Dunbar Corporation can either purchase an asset for $38,000, which will have no value after 13 years, or lease the same for 13 years with an annual lease payment of $4,458, due at the end of each year. The company's cost of debt is 8%. The IRS classifies the lease as a non-tax- oriented lease. What is the net advantage of leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Dunbar Corporation can purchase an asset for $21,000; the asset will be worthless after 13 years. Alternatively, it could lease the asset for 13 years with an annual lease payment of $2,113 paid at the end of each year. The firm’s cost of debt is 7%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.
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Dunbar Corporation can purchase an asset for $29,000; the asset will be worthless after 15 years. Alternatively, it could lease the asset for 15 years with an annual lease payment of $2,494 paid at the end of each year. The firm’s cost of debt is 5%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing?
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Finance Lease: Net Advantage to Leasing Dunbar Corporation can purchase an asset for $34,000; the asset will worthless after 12 years. Alternatively, it could lease the asset for 12 years with an annual lease payment of $4,640 paid at the end of each year. The firm's cost of debt is 10%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent. $
At the beginning of 2021, Killion Co. leased furniture to GameStop under a seven-year operating lease agreement. The lease requires quarterly payments of $30,000 each. The furniture was acquired by Killion at a cost of $2.5 million and was expected to have a useful life of 25 years with no residual value. How will GameStop's net income be impacted by this lease? (ignore taxes)? (Enter your answer in whole dollars.).
Riverside Inc. plans to purchase or lease $220,000 worth of new equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for five years. Assume Riverside’s borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease. If Riverton purchases the equipment, what is the amount of the lease-equivalent loan? a. $292,884 b. $192,488 c. $197,358 d. $195,70 0 e. $190,237
Suddeth Corporation has entered into a 6 year lease for a building it will use as a warehouse. The annual payment under the lease will be $2,468. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. If the discount rate is 5%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O O $14,808 $11,050 $14,103 $12,528
An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2019, the entity leased a machine to another entity under the following terms: • The lease term is 5 years. • The annual rental is P500,000 payable every January 1, 2019. • The machine has a cost to the entity of P1,600,000. • Implicit interest rate in the lease, known to the lessee, is 8%. The machine reverts back to the entity at the end of 5 years with unguaranteed residual value of P400,000. The present value factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.21 respectively. What amount should be recognized as interest income for 2019? 194,160 154,160 172,400 128,000 What amount gross income should be recognized by the entity for 2019? 555,000 827,000 955,000 700,000
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 18,500 Year 2: $ 23,500 Year 3: $ 28,500 Year 4: $ 33,500 An appropriate discount rate is 7 percentage, yielding a present value of $86,637. b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1? (Round your answer to…