On June 30, 2016, Blue, Inc., leased a machine from Big Leasing Corporation. The lease agreement qualifies as a capital lease and calls for Blue to make semiannual lease payments of $293,533 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016. Blueâs incremental borrowing rate is 12%, the same rate Big uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end 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) from the tables provided.)
Required
1. Determine the present value of the lease payments at June 30, 2016, (to the nearest $000) that Blue uses to record the leased asset and lease liability.
2. What would be the pretax amounts related to the lease that Blue would report in its balance sheet at December 31, 2016?
3. What would be the pretax amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2016?
On June 30, 2016, Blue, Inc., leased a machine from Big Leasing Corporation. The lease agreement qualifies as a capital lease and calls for Blue to make semiannual lease payments of $293,533 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016. Blueâs incremental borrowing rate is 12%, the same rate Big uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end 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) from the tables provided.)
Required
1. Determine the present value of the lease payments at June 30, 2016, (to the nearest $000) that Blue uses to record the leased asset and lease liability.
2. What would be the pretax amounts related to the lease that Blue would report in its balance sheet at December 31, 2016?
3. What would be the pretax amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2016?
Related questions
Werner Chemical, Inc., leased a protein analyzer on September30, 2016. The five-year lease agreement calls for Werner to makequarterly lease payments of $371,971, payable each September 30,December 31, March 31, June 30, with the first payment at September30, 2016. Werner's incremental borrowing rate is 12%. Depreciationis recorded on a straight-line basis at the end of each fiscalyear. The useful life of the equipment is five years. (FV of $1, PVof $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.) |
| Required: |
| 1. | Determine the present value of the lease payments at September30, 2016. |
2. What amounts related to the lease wouldWerner report in its balance sheet at December 31, 2016 (ignoretaxes)?
liability:
assett:
3. What amounts related to the lease wouldWerner report in its income statement for the year ended December31, 2016 (ignore taxes)?
total expenses:
4.What amounts related to the lease wouldWerner report in its statement of cash flows for the year endedDecember 31, 2016 (ignore taxes)?
| Capital Lease | ||
| Interest Portion | ||
| Principal Portion |
