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Akimi4 [234]
3 years ago
5

Pop Consulting leased machinery to Red Inc. on July 1, 2018. The lease was recorded as a sales type lease. The present value of

the lease payments discounted at 8% was $274,149. Ten annual lease payments of $44,617 are due each July 1 beginning July 1, 2018. Pop had manufactured the equipment at a cost of $156,000. The total increase in earnings (pretax) on Pop's December 31, 2018, income statement would be:_
Business
1 answer:
labwork [276]3 years ago
5 0

Answer:

The increase in earnings is $136511.56

Explanation:

Since the lease is a sale type of lease,it means that as soon as the machinery is delivered to the lessee,profit should be recognized on the lease transaction,which is computed below:

Profit on lease=present value of lease payments-costs

                         =$274149-$156000

                          =$118149

However,every six months interest is charged on the lease,which clearly indicates another source of earnings,the interest in the first six months is given below:

Interest=($274149-$44617)*8%

             =$18362.56

Please note that interest is charged after lease payment as lease payment is made in advance not in arrears.

Conclusively, the increase in earnings is $118149+$18362.56

That is $136511.56

                                                                   

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<h2>Further Explanation</h2>

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5 0
3 years ago
Read 2 more answers
Daniel is resigning from his position as a marketing specialist and would like a permanent record of her official resignation. W
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A letter is written communication from one party to another. Letters are written on a designated paper, put in an envelope and send either by post or hand-delivered.

A letter can be formal or informal. Daniel should write a formal letter to his boss informing him of his resignation. Should Daniel write a letter, It will an official document in the company. The company will be file the document appropriately and will stay intact for many years.

Daniel can also keep a copy of the letter for himself. A letter has an advantage over the other electronic options. Electronic records can be deleted permanently or get lost should the systems collapse.

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