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mr Goodwill [35]
3 years ago
12

Slow Mo Consulting leased machinery from Red Inc. on January 1, 2018. The lease was recorded as an operating lease. The present

value of the lease payments discounted at 12% was $843,000. Eight annual lease payments of $133,212 are due each Jan 1 beginning January 1, 2018.
On December 31, 2018, the amount reported as Amortization Expense on the Income Statement will be $_____.
Business
1 answer:
STALIN [3.7K]3 years ago
3 0

Answer:

The amount reported as amortization expense on the income statement is the annual lease payment of $133,212.00

Explanation:

Lease can belong to any of the two classes, namely operating lease and finance lease.

This is an example of operating lease where risks and rewards of ownership are not transferred to the lesse(the tenant), as a result the lesse cannot recognize the right-of-use asset on its balance sheet as well as lease liabilities.

Under operating, the lease payments made periodically is treated as the lease expense for the period it relates,this account for my position that the amortization expense on the income statement is the lease rental of $133,212.00

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Answer:

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Explanation:

1. Calculation to determine the net cash provided by operating activities for the year

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Adjustment for non cash effects

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Change in operating assets & liabilities

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Therefore Using the indirect method the net cash provided by operating activities for the year is $260

2. Preparation of a statement of cash flows for the year

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STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)

FOR THE YEAR ENDED

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$

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Net cash Flow from Investing activities (b) -$325

(-$395+$46+$24)

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Net Change in cash c=a+b+c -$25

Beginning cash balance $128

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Therefore the statement of cash flows for the year is $103

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