On January 1, 2018, Johnstone leased an office building. Terms of the lease require Johnstone to make 15 annual lease payments o
1 answer:
Answer:
LEASE LIABILITY: 1,121,136
Explanation:
the lease liaibility will be the present value of an annuity-due (payment at beginning of the period)
C 134,000
time 15
rate 0.1
PV $1,121,136
The lease laibility will be for 1,121,136
interst expense will be recognize over time against the lease liability and the payment decrease the liability. at the end of the agreement the lease liaiblity will be zero as there are no pending payment.
You might be interested in
Answer: Check attachment
Explanation:
In the attachment, note that:
On July 14:
Account payable was calculated as:
= $4400 - $300
= $4100
Merchandise Inventory = $4100 × 2%
= $4100 × 2/100
= $4100 × 0.02
= $82
Cash = $4100 - $82 = $4018.
Check attachment for further explanation.
Answer:
The project should be rejected as the payback period of 3.97 years exceeds the required 3 years. So, the correct option is E
Explanation:
The table showing the discounted cash flows of each year:
Computing discounted payback as:
Discounted Payback = Number of years + (Initial Cost - Discounted Cash flow of year 1 + Discounted Cash flow of year 2 + Discounted Cash flow of year 3 / Discounted Cash flow of year 4)
= 3 + ($120,000 - $0 - $28,925.62 - $41,322.31 / $51,226.01)
= 3 + ($49,752.07 / $51,226.01)
= 3 + 0.97
= 3.97
Working Note:
Discounted Cash Flow is computed as:
Discounted cash flow = Cash Flow / (1 + r) ^ n
where
r is rate of return that is 10%
n is number of year
So,
For 1st year:
= $0 / (1 + 0.1) ^1
= $0
For 2nd year:
= $35,000 / (1 + 0.1) ^ 2
= $35,000 / 1.21
= $28,925.61
For 3rd year:
= $55,000 / (1 + 0.1) ^ 3
= $55,000 / 1.331
= $41,322.31
For 4th year:
= $75,000 / (1 + 0.1) ^ 4
= $75,000 / 1.4641
= $51,226.01
