Neri Foods Corporation leased a commercial food processor on September 30, 2024. The five-year finance lease agreement calls or Neri to make quarterly lease payments of $78,310, payable each September 30, December 31, March 31, June 30, with the first ayment at September 30, 2024. Neri's incremental borrowing rate is 12%. Neri records amortization on a straight-line basis at the nd of each fiscal year. Neri recorded the lease as follows: September 30, 2024
Neri Foods Corporation leased a commercial food processor on September 30, 2024. The five-year finance lease agreement calls or Neri to make quarterly lease payments of $78,310, payable each September 30, December 31, March 31, June 30, with the first ayment at September 30, 2024. Neri's incremental borrowing rate is 12%. Neri records amortization on a straight-line basis at the nd of each fiscal year. Neri recorded the lease as follows: September 30, 2024
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject:acc
Transcribed Image Text:Neri Foods Corporation leased a commercial food processor on September 30, 2024. The five-year finance lease agreement calls
for Neri to make quarterly lease payments of $78,310, payable each September 30, December 31, March 31, June 30, with the first
payment at September 30, 2024. Neri's incremental borrowing rate is 12%. Neri records amortization on a straight-line basis at the
end of each fiscal year. Neri recorded the lease as follows:
September 30, 2024
General Journal
Right-of-use asset (calculated below)
Lease payable (calculated below)
Lease payable
Cash (first payment)
Calculation of the present value of lease payments
$78,310 x 15.3238* = $1,200,000 (rounded)
'Present value of an annuity due of $1: n = 20, i = 3%
Required:
What would be the pretax amounts related to the lease that Neri would report in its statement of cash flows for the year ended
December 31, 2024?
Item
Right-of-use asset
Lease payments:
Debit
1,200,000
Principal
Interest
78,310
Note: Cash outflows should be indicated with a minus sign. Do not round your intermediate calculations. Enter your answers
in whole dollars and not in millions.
Outflow from financing activities
Outflow from operating activities
Credit
Reported in Statement of Cash Flows as
Disclosure notes for Statement of Cash Flows
1,200,000
78,310
$
Amount
1,200,000
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