In the book it give the solution and the present value of period lease payments is ($120,000*5.21236) $625,483. On the present value tables provided, I am not understanding how it came up wtih 5.21236. OPERATING LEASEUnited Cellular Systems leased a satellite transmission device from Pinnacle Leasing Services on January 1, 2021. Pinnaclepaid $800,00o for the transmission device. Its fair value is $800,000.Terms of the Lease Agreement and Related Information:Lease term3 years (6 semiannual periods)Semiannual lease payments$120,000 at beginning of each periodEconomic life of asset5 yearsInterest rate12%Required:1. Prepare the appropriate entries for both United Cellular Systems and Pinnacle Leasing Services on January 1, 2021, thebeginning of the lease.2. Prepare an amortization schedule that shows the pattern of interest expense for United Cellular Systems and interestrevenue for Pinnacle Leasing Services over the lease term.3. Prepare the appropriate entries to record the second lease payment on July 1, 2021, and adjusting entries on December31, 2021 (the end of both companies' fiscal years).4. What will United Cellular Systems report in its income statement in connection with the lease for the year endedDecember 31, 2021?

The present value of an ordinary annuity table is used when the payments are made at the end of each…

In the book it give the solution and the present value of period lease payments is ($120,000*5.21236) $625,483. On the present value tables provided, I am not understanding how it came up wtih 5.21236.

In the book it give the solution and the present value of period lease payments is ($120,000*5.21236) $625,483. On the present value tables provided, I am not understanding how it came up wtih 5.21236.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 1 Seroja Berhad (Seroja) wishes to evaluate the following two alternatives available to acquire a machine: Lease Alternative Seroja can lease the machine under a 5-year lease requiring lease payment of RM5,000 at the beginning of each year. All maintenance costs will be borne by the lessor and the insurance and other costs will be borne by the lessee. "Borrowing to Buy" Alternative The machine costs RM20,000 and will have a 5-year life. The purchase will be financed by a 5- year, 15% interest. Seroja will pay RM1,000 per year for a service contract that covers insurance and other costs. Seroja Berhad plans to keep the machine and use it beyond its 5-year life. The machine will be depreciated as given below: Year Depreciation RM 1 5,000 2 4,000 3 3,000 4 2,000 5 1,000 Given that the corporate tax rate is 30%. From the above information you are required to answer the following questions. a. Give explanation to Seroja on ONE (1) benefit of leasing. b. Prepare the Cash Flows…
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Seroja Berhad (Seroja) wishes to evaluate the following two alternatives available to acquire a machine: Lease Alternative Seroja can lease the machine under a 5-year lease requiring lease payment of RM5,000 at the beginning of each year. All maintenance costs will be borne by the lessor and the insurance and other costs will be borne by the lessee. “Borrowing to Buy” Alternative The machine costs RM20,000 and will have a 5-year life. The purchase will be financed by a 5year, 15% interest. Seroja will pay RM1,000 per year for a service contract that covers insurance and other costs. Seroja Berhad plans to keep the machine and use it beyond its 5-year life. The machine will be depreciated as given below: Year Depreciation RM 1 5,000 2 4,000 3 3,000 4 2,000 5 1,000 Given that the corporate tax rate is 30%. Prepare the Cash Flows Analysis by clearly showing the Net Advantage of Leasing (NAL).…
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