In 2024, Monty Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company's specifications on land owned by another company. On January 1, 2025, Monty Trucking took possession of the leased properties. Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2025, with a bargain purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2025, through December 31, 2044. Rental payments of $816,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $326,400 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31. 2044. The lease was negotiated to assure the lessor a 6% rate of return. Selected present value factors are as follows. Periods 1 2 8 9 10 19 20 For an Ordinary Annuity of $1 at 6% 0.943396 1.833393 6.209794 6.801692 7.360087 11.158117 11.469921 For $1 at 6% 0.943396 0.889996 0.627412 0.591898 0.558395 0.330513 0.311805
In 2024, Monty Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company's specifications on land owned by another company. On January 1, 2025, Monty Trucking took possession of the leased properties. Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2025, with a bargain purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2025, through December 31, 2044. Rental payments of $816,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $326,400 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31. 2044. The lease was negotiated to assure the lessor a 6% rate of return. Selected present value factors are as follows. Periods 1 2 8 9 10 19 20 For an Ordinary Annuity of $1 at 6% 0.943396 1.833393 6.209794 6.801692 7.360087 11.158117 11.469921 For $1 at 6% 0.943396 0.889996 0.627412 0.591898 0.558395 0.330513 0.311805
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:10
(a)
19
20
7.360087
11.158117
11.469921
Save for Later
CARS
Compute for Monty Trucking the present value of the terminal facilities and related obligation at January 1, 2025. (Round
answers to 0 decimal places, e.g. 125.)
eTextbook and Media
0.558395
List of Accounts
0.330513
Discounted present value of terminal facilities and related obligation
0.311805
Attempts: 0 of 3 used Submit Answer
Transcribed Image Text:In 2024, Monty Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight
storage facilities. The buildings were erected to the company's specifications on land owned by another company. On January 1, 2025,
Monty Trucking took possession of the leased properties.
Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2025, with
a bargain purchase option available upon expiration of the lease.
The 20-year lease is effective for the period January 1, 2025, through December 31, 2044. Rental payments of $816,000 are payable
to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $326,400 are due on January 1
for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31.
2044. The lease was negotiated to assure the lessor a 6% rate of return.
Selected present value factors are as follows.
Periods
1
2
8
9
10
19
20
For an Ordinary
Annuity of $1 at
6%
0.943396
1.833393
6.209794
6.801692
7.360087
11.158117
11.469921
For $1 at 6%
0.943396
0.889996
0.627412
0.591898
0.558395
0.330513
0.311805
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