General Accounting Kingston Corporation enters into a lease on January 1, 20X3that is accounted for as a capital lease. The lease requiresquarterly payments of $18,000, starting on January 1, 20X3, andcontinuing for 4 years. The last payment is due on October 1,20X6. The lease has an implicit annual interest rate of 6%.The present value of an annuity due:• At 6% per year for 4 years is 3.465.• At 1.5% per period for 16 periods is 13.590.What amount will Kingston Corporation report as a leaseobligation on its financial statements dated December 31,20X3?Options:A. $244,620B. $243,500C. $245,000D. $242,800

Step 1: Define Present Value of an Annuity DueThe present value of an annuity due is the current…

Answered: Kingston Corporation enters into a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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An asset with a cost of $80,000 is leased on 1/1/x1. The lease is a sales-type lease for the lessor. Six annual lease payments are due on December 31 beginning on 12/31/x1. The asset will have no residual value. The lessor sets a rate of return of 8% and charges the lessee annual lease payments of $20,550. Present value factor of an ordinary annuity for six years at 8% 4.62288 Present value factor of an annuity due for six years at 8% 4.99271 Present value factor of a single sum for a six-year term at 8% .63017 In the journal entry at the inception of the lease under the gross method, what amount does the lessor credit to unearned interest? Group of answer choices A. $28,300 D. $43,300 B. $95,000 C. $123,300
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Ivanhoe Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Ivanhoe. The six-year lease requires payment of $172000 at the beginning of each year, including $25200 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor’s implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Ivanhoe should record the leased asset at 824016 858746 732930 703288
A contract requires lease payments of $900 at the beginning of every month for 5 years. a. What is the present value of the contract if the lease rate is 3.50% compounded annually? $22,450.26 ☑ Round to the nearest cent b. What is the present value of the contract if the lease rate is 3.50% compounded monthly? $49,472.99 X Round to the nearest cent
A contract requires lease payments of $900 at the beginning of every month for 5 years. a. What is the present value of the contract if the lease rate is 5.50% compounded annually? b. What is the present value of the contract if the lease rate is 5.50% compounded monthly?
A lease agreement valued at $25,000.00 requires payment of $900.00 at the beginning of every quarter for 12 years. What is the nominal rate of interest charged (compounded quarterly)?
At the beginning of the current year, Ashe Company entered into a ten-year noncancelable lease requiring year-end payments ofP1,000,000. Ashe’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Ashe, is 10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10% and 5.650 at 12%. On the same date, Ashe Company paid the initial direct cost of P200,000 to negotiate and secure the leasing agreement. Ownership of the property remains to the lessor at the expiration of the lease. The leased property has an estimated economic life of 12 years. 1. What amount should be capitalized as cost of the Right to Use Asset?a. 6,145,000b. 6,345,000c. 5,650,000d. 5,850,000 2. What is the depreciation for the current year?a. 614,500b. 634,500c. 528,750d. 565,000 3. What is the lease liability at the end of the current year?a. 5,328,000b. 5,552,000c. 5,759,500d. 5,979,500
An investor has the opportunity to buy a long-term sub-lease contract that calls for 20 semi-annual payments of $18,000 each. Payments on the sub-lease are to be made at the beginning of each semi- annual period, commencing on the date that the leasehold interest is purchased. The investor desires a minimum yield of 6% per annum, compounded annually. 7. What type of annuity is described by the above facts? (1) Ordinary simple annuity (2) General annuity due (3) Simple annuity due (4) Ordinary general annuity
The present value of a 7 year lease that requires payments of $550 at the beginning of every month is $43,500. What is the nominal interest rate compounded monthly charged on the lease? 0.00 % Round to two decimal places
A lease agreement valued at $33,000 requires payment of $4,300 every three months in advance. The payments are deferred for three years and month is worth 10% compounded quarterly.a. How many lease payments are to be made under the contract?b. What is the size of the final lease payment?
3. A contract requires lease payments of $800 at the beginning of every month for 4 years a. What is the present value of the contract if the lease rate is 3.50% compounded annually? b. What is the present value of the contract if the lease rate is 3.50% compounded monthly? Kindly add all the decimals DO NOT ROUND

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