Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, 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. Wildhorse, Inc.’s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Wildhorse, Inc.) is 7%. Wildhorse, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Wildhorse, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary Annuity 7%, 4 periods 3.62432 3.38721 9%, 4 periods 3.53129 3.23972 ANSWER CHOICES: 0 because the asset is amortized by Wildhorse Company $383279 $367641 $393377
Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, 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. Wildhorse, Inc.’s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Wildhorse, Inc.) is 7%. Wildhorse, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Wildhorse, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary Annuity 7%, 4 periods 3.62432 3.38721 9%, 4 periods 3.53129 3.23972 ANSWER CHOICES: 0 because the asset is amortized by Wildhorse Company $383279 $367641 $393377
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, 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. Wildhorse, Inc.’s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Wildhorse, Inc.) is 7%. Wildhorse, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Wildhorse, Inc. in the first year of the asset’s life?
|
PV Annuity Due |
PV Ordinary Annuity |
|
| 7%, 4 periods |
3.62432 |
3.38721 |
| 9%, 4 periods |
3.53129 |
3.23972 |
ANSWER CHOICES:
| 0 because the asset is amortized by Wildhorse Company |
|
|
$383279 |
|
|
$367641 |
|
|
$393377 |
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