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True [87]
3 years ago
15

A comparison between Operating Lease and Capital Lease Now assume that Company ABC leases an equipment for 5 years instead. Othe

r information mostly remains the same (except for highlighted texts) Leased assets have an expected life of 5 years Depreciation is straight line Annual lease payment is $2,505. *Interest rate is 8%. the ownership of the property goes back to the lessor at the end of the lease term Lease payments are made at beginning of each year *the present value of the lease payment is 10,000 (Present value of 2,505 ordinary annuity for 5 years at 8%) Fair value of the equipment is 10,000 The lease does not contain a bargain purchase option a. Determining type of lease. lease transfers ownership of property to lessee by end of the lease term (ii) lease contains an option to purchase the property at a bargain price (iii) lease term is 75% or more of estimated economic life of the property v) the present value of rentals and other minimum lease payments at beginning of lease term is 90% or more of the fair value of leased property Which of the above criteria is met? Correct Correct Correct Correct Based on your answers above, what type of lease is this? Correct (ii) NO ii) YES (iv) YES Capital lease b. To record the type of lease indicated above, multiple journal entries are required 1) To record the initiation of the lease, an lease asset and a lease obligation is recorded on the book at the fair value of the equipment Dr: asset Correct 10000 Correct Cr: Lease liability Correct 10000 Correct 2) At the end of year 1, the following two journal entries are recorded First, as the lessee recorded the "leased asset" on the balance sheet, it is necessary to depreciate this asset. To record the depreciation expense using the straight-line depreciation method To record the depreciation expense using the straight-line depreciation method (over a 5-year period, no residual value), the company records the following JE Dr: eciation expense 2000 Correct Correct Accumulated Dr Correct Cr: 2000 Correct Second, at the time the lessee makes cosh payment of $2505, a portion of that is considered payment of interest expense (coiculoted os principle times interest rotel the rest is considered repoyment ot principle (this is exactly like when you pay a mortgage on a car or a house) the following journal entry is he recorded inter est expense Lease liability Correct Correct Cash enter amount enter amount Correct 2505 Correct

Business
1 answer:
damaskus [11]3 years ago
8 0

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

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Walter’s dividend is expected to grow at a constant growth rate of 6.50% per year. What do you expect to happen to Walter’s expe
denpristay [2]

Answer:

A. It will stay the same.

Explanation:

The formula to compute the dividend yield is shown below:

= (Annual dividend ÷ market price) × 100

Since in the question, it is given that the expected dividend is growing at the constant growth rate i.e 6.50%, so the expected dividend yield will remain the same in the future.  

As it shows a direct relationship between the growth rate and the dividend yield plus the market price is growing at a steady rate

3 0
3 years ago
You are evaluating a project that will cost $500,000, but is expected to produce cash flows of $125,000 per year for 10 years, w
boyakko [2]

Answer:

1. 4 years

2. No

Explanation:

Payback period calculates the amount of time to recoup the total investment made on a project. It calculates how long the cash flows generated from a project would cover the cost of the project.

The cost of the project is $500,000

Cash flows are $125,000 per year for 10 years.

In the first year, the cost of the project is reduced by $125,000 and becomes $375,000.

In the second year, the cost of the project is reduced by $125,000 and becomes $250,000.

In the third year, the cost of the project is reduced by $125,000 and becomes $125,000.

In the fourth year, the cost of the project is reduced by $125,000 and becomes $0.

The cost of the project is totally recouped in the 4th year. therefore, the payback period is 4 years.

But the company has a preferred payback period of 3 years ,therefore , the firm won't undertake the project because the payback period is more than 3 years.

3 0
3 years ago
Click this link to view O*NET’s Skills section for Film and Video Editors. Note that common skills are listed toward the top, an
olasank [31]

Answer:

B, C, and E

Explanation:

6 0
3 years ago
Read 2 more answers
Joe is one of the lead accountants for his company. Last month he was pressured to prepare the financial reports more quickly th
Minchanka [31]

Answer:

Explained.

Explanation:

Joe being the lead accountant for his company so, he prepares the financial reports.

Joe made mistakes in financial report making his  manager angry  because the resources at the Joe's company are limited and financial report that are timely and reliable would have helped the company to attract some financial investment.

6 0
2 years ago
A $600,000 state lottery prize is spread evenly over twelve years ($50,000 a year) (Alternative 1), or you may take a lump distr
scZoUnD [109]

Answer and Explanation:

The computation of the present values of both alternatives is shown below:

For alternative one, the lump sum amount is

= Yearly payment × PVIFA factor at 8% for 12 years

= $50,000 × 7.5361

= $376,805

And, in the alternative 2, the lumpsum amount i.e. present value is $452,000

So as we can see that the alternative 2 is better as the lumspsum amount is high as compared with the alternative 1

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