Wilson Foods Corporation leased a commercial food processor on September 30, 2021. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $313,238, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2021. Wilson’s incremental borrowing rate is 12%. Wilson records amortization on a straight-line basis at the end of each fiscal year. Wilson recorded the lease as follows: September 30, 2021Right-of-use asset (calculated below)4,800,000 Lease payable (calculated below) 4,800,000 Lease payable313,238 Cash (first payment) 313,238 Calculation of the present value of lease payments$313,238 × 15.3238* = $4,800,000 (rounded)*Present value of an annuity due of $1: n = 20, i = 3% Required:What would be the pretax amounts related to the lease that Wilson would report in its statement of cash flows for the year ended December 31, 2021?

Cash flow statement consists of cash flow from operating, investing and financing activities. The…

Answered: Wilson Foods Corporation leased a…

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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Wilson Foods Corporation leased a commercial food processor on September 30, 2021. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $313,238, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2021. Wilson’s incremental borrowing rate is 12%. Wilson records amortization on a straight-line basis at the end of each fiscal year. Wilson recorded the lease as follows:


September 30, 2021
Right-of-use asset (calculated below)	4,800,000
Lease payable (calculated below)		4,800,000

Lease payable	313,238
Cash (first payment)		313,238

Calculation of the present value of lease payments

$313,238 × 15.3238* = $4,800,000 (rounded)

*Present value of an annuity due of $1: n = 20, i = 3%

Required:
What would be the pretax amounts related to the lease that Wilson would report in its statement of cash flows for the year ended December 31, 2021?

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