January 1, 2024, Paradise Partners decides to upgrade recreational equipment at its resorts. The company is contemplating whether to purchase or lease the new equipment. Use PV of $1 and PVA of $1. (Use appropriate factor(s) from the tables provided.) Required: 1. The company can purchase the equipment by borrowing $284,000 with a 20-month, 12% installment note. Payments of $15,737.95 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 20-month lease for the equipment by agreeing to pay $12,523.86 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company's amount of reported debt, and by how much? 4. Suppose the equipment has a total value of $101,000 at the end of the 20-month period, which option (purchasing with installment

January 1, 2024, Paradise Partners decides to upgrade recreational equipment at its resorts. The company is contemplating whether to purchase or lease the new equipment. Use PV of $1 and PVA of $1. (Use appropriate factor(s) from the tables provided.) Required: 1. The company can purchase the equipment by borrowing $284,000 with a 20-month, 12% installment note. Payments of $15,737.95 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 20-month lease for the equipment by agreeing to pay $12,523.86 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company's amount of reported debt, and by how much? 4. Suppose the equipment has a total value of $101,000 at the end of the 20-month period, which option (purchasing with installment

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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On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from Computer World Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $12,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $95, 000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. 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 appropriate journal entries recorded by Nath - Langstrom Services for the first year of the lease. Prepare appropriate journal entries recorded by Computer World Leasing for the first year of the lease.
Dave Krug finances a new automobile by paying $7,300 cash and agreeing to make 30 monthly payments of $460 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Monthly Payment Table Values are Based on: Present Value of Loan n i X = = + Table Factor Cash Down Payment = Present Value of Loan Cost of the Automobile
Sheffield Marina has 300 available slips that rent for $900 per season. Payments must be made in full by the start of the boating season, April 1, 2021. The boating season ends October 31, and the marina has a December 31 year-end. Slips for future seasons may be reserved if paid for by December 31, 2021. Under a new policy, if payment for 2022 season slips is made by December 31, 2021, a 4% discount is allowed. If payment for 2023 season slips is made by December 31, 2021, renters get a 21% discount (this promotion hopefully will provide cash flow for major dock repairs).On December 31, 2020, all 300 slips for the 2021 season were rented at full price. On December 31, 2021, 213 slips were reserved and paid for the 2022 boating season, and 62 slips were reserved and paid for the 2023 boating season.(a) Prepare the appropriate journal entries for December 31, 2020, and December 31, 2021.
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On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. . The contract calls for four rent payments of $18,500 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $107,000 and were expected to have a useful life of five years with no residual value. . Both firms record amortization and depreciation semiannually. 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. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.
On January 1, 2025, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.
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On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $20,000 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $110,000 and were expected to have a useful life of eight years with no residual value. . Both firms record amortization and depreciation semiannually. 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. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your…
Blossom Greenhouses Ltd. signed a 15-year, 4.0%, $910,000 loan on September 30, 2024, to help finance a new state-of-the-art greenhouse with an associated renewable energy source. The loan terms provide for semi-annual payments of $40,631 principal and interest. Payments are due on March 31 and September 30. The company's year end is September 30. (a) Your Answer Correct Answer Your answer is correct. Prepare an instalment payment schedule for the first two years. (Round answers to 0 decimal places, e.g. 5,255.) Semi-Annual Interest Period Cash Payment Interest Expense Reduction of Principal Principal Balance 910,000 Sept. 30, 2024 40631 18200 22431 887569 Mar. 31, 2025 Sept. 30, 2025 40631 17752 22879 864,690 40631 17294 23337 841353 Mar. 31, 2026 Sept. 30, 2026 40631 16827 23804 817549 SUPPO (b) Record the receipt of the loan on September 30, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No…
Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term leases. . Universal earns interest under these arrangements at a 10% annual rate. . Universal purchased an electronic typesetting machine on December 31, 2023, for $94,000 and then leased it to Desktop. Incorporated, a local publisher. The six-year operating lease term commenced January 1, 2024, and the lease contract specified annual payments of $8.400 beginning December 31, 2024, and on each December 31 through 2029. . The machine's estimated useful life is 15 years with no estimated residual value. • The publisher had the option to terminate the lease after four years. At the beginning of the lease, there was no reason to believe the lease would be terminated. Required: 1. Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of 2024.…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $509,761 over a five-year lease term (also the asset's useful life). payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 8% the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.3 million. 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 amount related to the lease would IC report In Its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its Income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $202,600 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection Title search Renovation Landscaping Loan interest Insurance Property taxes Selling expenses Required: $ 539 1,078 13,000 878 7,239 1,839 6,039 8,000 a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,980 per month. However, he would have to make an additional $7,980 in interest payments on his loan during that time, and then sell. What would the…