Sheridan, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $394152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Sheridan, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Sheridan, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception? PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16987 $1409921 $1305483 $1249411 $1374349
Sheridan, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $394152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Sheridan, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Sheridan, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception? PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16987 $1409921 $1305483 $1249411 $1374349
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sheridan, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $394152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Sheridan, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Sheridan, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception?
|
PV Annuity Due |
PV Ordinary Annuity |
|
| 8%, 4 periods |
3.57710 |
3.31213 |
| 10%, 4 periods |
3.48685 |
3.16987 |
$1409921
$1305483
$1249411
$1374349
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