On January 1, 2019, ET Mags Inc. signed a 6-year non-cancelable lease for an alloy wheel molding injection press. The terms of the lease called for ET Mags to make annual payments of $34,533.30 at the beginning of each year, starting January 1, 2019. The alloy wheel molding injection press has an estimated useful life of 6 years and a $10,000 unguaranteed residual value. The press reverts back to the lessor at the end of the lease term. ET Mags uses the straight-line method of depreciation for all of its plant assets and has an incremental borrowing rate of 6%; the lessor's implicit rate is unknown. Required: (a) Compute the present value of the minimum lease payments; round to nearest whole dollar. (b) Prepare all necessary journal entries for ET Mags covering this lease through December 31, 2020; round your entries to nearest whole dollar.
On January 1, 2019, ET Mags Inc. signed a 6-year non-cancelable lease for an alloy wheel molding injection press. The terms of the lease called for ET Mags to make annual payments of $34,533.30 at the beginning of each year, starting January 1, 2019. The alloy wheel molding injection press has an estimated useful life of 6 years and a $10,000 unguaranteed residual value. The press reverts back to the lessor at the end of the lease term. ET Mags uses the straight-line method of depreciation for all of its plant assets and has an incremental borrowing rate of 6%; the lessor's implicit rate is unknown. Required: (a) Compute the present value of the minimum lease payments; round to nearest whole dollar. (b) Prepare all necessary journal entries for ET Mags covering this lease through December 31, 2020; round your entries to nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2019, ET Mags Inc. signed a 6-year non-cancelable lease for an alloy
wheel molding injection press. The terms of the lease called for ET Mags to make
annual payments of $34,533.30 at the beginning of each year, starting January 1,
2019.
The alloy wheel molding injection press has an estimated useful life of 6 years and
a $10,000 unguaranteed residual value. The press reverts back to the lessor at the
end of the lease term.
ET Mags uses the straight-line method of depreciation for all of its plant assets
and has an incremental borrowing rate of 6%; the lessor's implicit rate is
unknown.
Required:
(a) Compute the present value of the minimum lease payments; round to nearest
whole dollar.
(b) Prepare all necessary journal entries for ET Mags covering this lease through
December 31, 2020; round your entries to nearest whole dollar.
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