Wildhorse, Inc. manufactures machinery used in the mining industry. On January 2, 2021 it leased equipment with a cost of $570000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments of $190966 at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 9%, and it depreciates similar equipment using the double - declining balance method. The selling price of the equipment is $870000, and the rate implicit in the lease is 7%, which is known to Silver Point Co. What is the book value of the leased asset at December 31, 2021? $696000 $522000 $870000 $556800

Wildhorse, Inc. manufactures machinery used in the mining industry. On January 2, 2021 it leased equipment with a cost of $570000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments of $190966 at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 9%, and it depreciates similar equipment using the double - declining balance method. The selling price of the equipment is $870000, and the rate implicit in the lease is 7%, which is known to Silver Point Co. What is the book value of the leased asset at December 31, 2021? $696000 $522000 $870000 $556800

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Wildhorse, Inc. manufactures machinery used in the mining industry. On January 2, 2021 it
leased equipment with a cost of $570000 to Silver Point Co. The 5-year lease calls for a 10%
down payment and equal annual payments of $190966 at the end of each year. The
equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is
9%, and it depreciates similar equipment using the double - declining balance method. The
selling price of the equipment is $870000, and the rate implicit in the lease is 7%, which is
known to Silver Point Co. What is the book value of the leased asset at December 31, 2021?
$696000 $522000 $870000 $556800

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