On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: Jan. 1 2821 2822 2023 2024 2025 2026 2827 2038 2039 2040 Payments 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 Effective Decrease in Interest Balance 14,502 14,028 13,529 13,005 12,456 11,878 11,272 2,231 1,143 24,000 9,498 9,972 1. Lease liability 2. Right-of-use asset 3. Lease term 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense 10,471 10,995 11,544 12,122 12,728 21,769 22,857 Outstanding Balance 314,048 290, 848 280,550 270,578 260, 107 249, 112 237,568 225,446 44,627 22,858 Required: 1. What is Majestic's lease liability after the first lease payment?? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease? years %6
On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: Jan. 1 2821 2822 2023 2024 2025 2026 2827 2038 2039 2040 Payments 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 Effective Decrease in Interest Balance 14,502 14,028 13,529 13,005 12,456 11,878 11,272 2,231 1,143 24,000 9,498 9,972 1. Lease liability 2. Right-of-use asset 3. Lease term 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense 10,471 10,995 11,544 12,122 12,728 21,769 22,857 Outstanding Balance 314,048 290, 848 280,550 270,578 260, 107 249, 112 237,568 225,446 44,627 22,858 Required: 1. What is Majestic's lease liability after the first lease payment?? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease? years %6
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hi,
Can you help with the attached questions, thanks kindly.
Transcribed Image Text:On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made
annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of
the Equipment Leasing's lease amortization schedule appear below:
Jan. 1
2821
2822
2023
2024
2025
2026
2827
2038
2039
2040
Payments
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
Effective Decrease in
Interest Balance
14,502
14,028
13,529
13,005
12,456
11,878
11,272
2,231
1,143
24,000
9,498
9,972
1.
Lease liability
2.
Right-of-use asset
3.
Lease term
4. Effective annual interest rate
5.
Total of lease payments
6. Total effective interest expense
10,471
10,995
11,544
12,122
12,728
21,769
22,857
Outstanding
Balance
314,048
290, 848
280,550
270,578
260, 107
249, 112
237,568
225,446
44,627
22,858
Required:
1. What is Majestic's lease liability after the first lease payment??
2. What amount would Majestic record as a right-of-use asset?
3. What is the lease term in years?
4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.)
5. What is the total amount of lease payments?
6. What is the total effective interest expense recorded over the term of the lease?
years
%6
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