In 2024, Nash Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freightstorage facilities. The buildings were erected to the company's specifications on land owned by another company. On January 1, 2025,Nash 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, witha 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 $864,000 are payableto the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $345,600 are due on January 1for 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.For an OrdinaryPeriods Annuity of $1 at 6%12891019200.9433961.8333936.2097946.8016927.36008711.15811711.469921For $1 at 6%0.9433960.8899960.6274120.5918980.5583950.3305130.311805 (a)* Your answer is incorrect.Compute for Nash Trucking the present value of the terminal facilities and related obligation at January 1, 2025. (Round answers toO decimal places, e.g. 125.)Discounted present value of terminal facilities and related obligation $9162492

The present value of the terminal facilities and related obligations will be equal to the present…

Answered: In 2024, Nash Trucking Company…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $779,677 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $103,000. Negotiations led to the lessee guaranteeing a $146,000 residual value. Equal payments under the lease are $203,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments. 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: Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease.
On January 1, 2021, Central Industries leased a high-performance conveyer to Dynamic Company for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Central. The equipment cost Central $1,912,000 and has an expected useful life of five years. Central expects the residual value at December 31, 2025, will be $600,000. Negotiations led to the lessee guaranteeing a $680,000 residual value. Equal payments under the finance/sales-type lease are due on December 31 of each year with the first payment being made on December 31, 2021. Dynamic is aware that Central used a 5% interest rate when calculating lease payments.What is the amount that the lessee will record as Right-of-use-Asset and Lease Liability ?
On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of $100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is $2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswell’s incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of $7,000 annually,…
At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. • The lease agreement specifies annual payments of $32,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. . The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of Its life. . Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $73,596. Crescent seeks a 9% return on Its lease Investments. . By this arrangement, the lease is deemed to be an operating lease. 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 will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. 2. What…
On January 1, 2023, Wynn Manufacturing leased a floor of a building for use in its North American operations from Easymoney Bank. The 9-year, noncancellable lease requires annual lease payments of $12,000, beginning January 1, 2023, and at each January 1 thereafter through 2031.The lease agreement does not transfer ownership, nor does it contain a purchase option. The floor of the building has a fair value of $85,000 and an estimated remaining life of 10 years. Easymoney Bank's implicit rate of 10% is known to Wynn.At what amount is the lease liability recorded at lease commencement? Group of answer choices $85,735 $108,000 $76,019 $81,108
To raise operating funds, North American Courier Corporation sold its building on January 1, 2021, to an insurance company for $508,000 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2030, at which time ownership of the building will revert to North American Courier. The building has a carrying amount of $470,000 (original cost $1,140,000). The lease requires North American to make payments of $89,908 to the insurance company each December 31. The building had a total original useful life of 30 years with no residual value and is being depreciated on a straight-line basis. The lease has an implicit rate of 12%. (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 appropriate entries for North American (a) on January 1, 2021, to record the transaction and (b) on December 31, 2021, to record necessary adjustments.2. Show how North American’s…
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $22,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $189,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method. Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (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. What will be the effects of the lease on Crescent's earnings for the first year (ignore taxes)? (Enter decreases with negative numbers.) 2. What will be the balances in the balance sheet accounts related to the lease…
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year leaseagreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2018, the beginningof the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescentat a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value atthe end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at theend of the lease term of $50,995.). Both (a) the present value of the lease payments and (b) the present value ofthe residual value (i.e., the residual asset) are included in the lease receivable because the two amounts combineto allow the lessor to recover its net investment. Crescent seeks a 10% return on its lease investments. By thisarrangement, the lease is deemed to be a finance lease.Required:1. What will be the effect of the lease on…
At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. The equipment was acquired recently by Crescent at a cost of $171,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $4,666. Crescent seeks a 8% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. 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: What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. What will be the…
Blossom, Inc. leases a piece of equipment to Wildhorse Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $8,880 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $48,000, a book value of $43,000, and a useful life of 8 years. At the end of the lease term, Blossom expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Blossom wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically
Monk Company, a dealer in machinery and equipment, leased equipment with a 10-year life to Leland Inc. on July 1, 2014. The lease is appropriately accounted for as a sale by Monk and as a purchase by Leland. The lease is for an eight-year period, expiring June 30, 2022. The first of eight equal payments of $300,000 is due on June 30, 2015. Leland has an option to purchase the equipment on June 30, 2022, for $100,000 even though the expected residual value at that time is $600,000. Leland’s incremental borrowing rate is 7%, and it uses straight-line depreciation. The equipment is expected to have a salvage value of zero at June 30, 2024. Required: 2. Prepare Leland’s amortization table for the leased equipment.
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $28,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $69,847.) Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (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. What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? (Enter decreases with negative sign.)2. What will be…

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