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emmainna [20.7K]
3 years ago
11

On January 1, 2018, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for O

gleby to make annual payments of $180,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease transaction as a finance lease. The minimum lease payments were determined to have a present value of $750,578 at an effective interest rate of 10%.
With respect to this lease, for 2018 Ogleby should record

a. rent expense of $180,000.

b. interest expense of $57,058 and amortization expense of $150,116.

c. interest expense of $57,058 and amortization expense of $107,225.

d. interest expense of $90,000 and amortization expense of $181,956

Show all work including formulas
Business
1 answer:
Olin [163]3 years ago
4 0

Answer:

With respect to this lease, for 2018 Ogleby should record interest expense of $57,058 and depreciation expense of $107,225. The right answer is c

Explanation:

According to the given data we have the following:

PV of lease=$750,578

Annual payment=$180,000

Rate of interesr=10%

The interest expense would be calculated as follows:

Interest expense = ( PV of lease - Annual payment ) * Rate of interest

Interest expense = ( $750,578 - $180,000 ) * 10%

Interest expense = $57,058

Therefore, With respect to this lease, for 2018 Ogleby should record interest expense of $57,058 and depreciation expense of $107,225.

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Holiday Shipping Express is considering a project that will require $28,000 in net working capital and $87,000 in fixed assets.
____ [38]

Answer:

the operating cash flow is $17,820

Explanation:

The computation of the operating cash flow is shown below;

Annual depreciation = $87,000 ÷5

= $17,400

Now

Operating cash flow is

= (sales - cash costs - depreciation) × (1 - tax rate) + depreciation expense

= ($75,000 - $57,000 - $17,400) × (1 - 0.3) + $17,400

= $420 + $17,400

= $17,820

hence, the operating cash flow is $17,820

7 0
2 years ago
"When aggregate demand​ increases," A. the price level is likely to fall as GDP rises. B. aggregate supply will shift to the rig
stira [4]

Answer:

D. the price level is likely to rise as GDP rises.

Explanation:

The aggregate demand measures all the goods produced in an economy at a given price in a particular period.

When the aggregate demand increases, the aggregate demand curve shifts to the right. When aggregate demand increases, aggregate demand exceeds aggregate supply and aggregate price and output would increase.

7 0
2 years ago
In "thinking like an economist," the section "the role of economic theory" states that many economists believe that useful insig
rusak2 [61]

In "thinking like an economist," the section "the role of economic theory" states that many economists believe that useful insights into our behavior can be gained by assuming that we act as if governed by the rules of rational decision-making.

It is possible to define rational decision-making as a decision-making process that incorporates reasoning at every stage. It is founded on the use of impartial knowledge. The first step in making a reasonable decision is to identify the issue that needs to be resolved, followed by the collection of all relevant data.

The next step is to examine every outcome that might result from each potential solution. The decision-making process that follows comprises weighing all viable options and selecting the best one based on reasoning.

Rational decision-making examples include:

● A student chooses what to study in his post-secondary education.

● A commercial choice regarding what to buy for the company.

To know more about decision-making refer to:

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7 0
1 year ago
A three-year annuity-immediate will be issued a year from now with annual payments of 5,000. Using the forward rates, calculate
vladimir1956 [14]

Answer:

13,152.5

Explanation:

Given the the above parameters as mentioned in the question

To calculate the PV (Present Value)

We have PV = 5000 * 1.05 * [ 1/(1.0575)² + 1/(0.625)³ + 1/(1.065)⁴]

PV = 5000 * 1.05 * (0.8942094350 + 0.8337064929 + 0.7773230908) =

=> PV = 5000 * 1.05 * 2.5052390187

= 13,152.50

Therefore, in this case, using the forward rates, the present value of this annuity a year from now is 13,152.50

6 0
3 years ago
Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing whea
timurjin [86]

Answer:

The correct answer is <em>d. Canada requires fewer resources than the U.S. to produce a bushel of wheat.</em>

Explanation:

A country (in this case Canada) has a comparative advantage over another country (in this case the United States) to produce a certain product (in this case wheat) if the production costs of that product (wheat) are less than from the other country, regardless of the opportunity cost of producing that other product in that country.

The comparative advantage is based on the fact that the country has developed greater efficiency in the use of resources or that it has greater ease of access to them due to better conditions of nature, greater technological development in the field in question, human capital more specialized in that economic field, etc.

The opportunity cost of producing a product or another in the same country does not affect a deterioration or increase of the comparative advantage developed to produce such a product.

6 0
3 years ago
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