On June 30, 2016, Blue, Inc., leased a machine from Big LeasingCorporation. The lease agreement qualifies as a capital lease andcalls for Blue to make semiannual lease payments of $214,208 over afour-year lease term, payable each June 30 and December 31, withthe first payment at June 30, 2016. Blueâs incremental borrowingrate is 12%, the same rate Big uses to calculate lease paymentamounts. Depreciation is recorded on a straight-line basis at theend of each fiscal year. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) (Use appropriate factor(s) fromthe tables provided.)
1. Determine the present value of the leasepayments at June 30, 2016, (to the nearest $000) that Blue uses torecord the leased asset and lease liability.
Present Value:
2. What would be the pretax amounts related to the lease thatBlue would report in its balance sheet at December 31, 2016?
Leased asset:
Leased liability:
3. What would be the pretax amounts related to the lease thatBlue would report in its income statement for the year endedDecember 31, 2016?
Pretax amount:
On June 30, 2016, Blue, Inc., leased a machine from Big LeasingCorporation. The lease agreement qualifies as a capital lease andcalls for Blue to make semiannual lease payments of $214,208 over afour-year lease term, payable each June 30 and December 31, withthe first payment at June 30, 2016. Blueâs incremental borrowingrate is 12%, the same rate Big uses to calculate lease paymentamounts. Depreciation is recorded on a straight-line basis at theend of each fiscal year. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) (Use appropriate factor(s) fromthe tables provided.)
1. Determine the present value of the leasepayments at June 30, 2016, (to the nearest $000) that Blue uses torecord the leased asset and lease liability.
Present Value:
2. What would be the pretax amounts related to the lease thatBlue would report in its balance sheet at December 31, 2016?
Leased asset:
Leased liability:
3. What would be the pretax amounts related to the lease thatBlue would report in its income statement for the year endedDecember 31, 2016?
Pretax amount:
Related questions
| NutraLabs, Inc., leased a protein analyzer to Werner Chemical,Inc., on September 30, 2016. NutraLabs manufactured the machine ata cost of $5.4 million. The five-year lease agreement calls forWerner to make quarterly lease payments of $420,914, payable eachSeptember 30, December 31, March 31, June 30, with the firstpayment at September 30, 2016. NutraLabsâ implicit interest rate is12%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVADof $1) (Use appropriate factor(s) from the tablesprovided.) 1- Determine the price at which NutraLabs is "selling" theequipment (present value of the lease payments) at September 30,2016 Present value=__________ 2- What amounts related to the lease would NurtaLabs report inits balance sheet at December 21, 2016 (ignore taxes)? Net receivable=________ 3- What amounts related to the lease would NutraLabs report onits income statement for the year ended December 31, 2016 (ignoretaxes) Income effect=_________ |
