Problem 4. Direct Financing Lease with Residual Value On January 1, 20x1, ABC Financing Co. leased equipment to XYZ Inc. Information on the lease is shown below. Cost of Equipment P3 00,000 Useful Life of Equi pment 5 years Lease Term 4 years Annual rent payable at the end of each year 100,000 Market rate of interest 10% Residual Value 20,000 The equipment will revert back to ABC The lease is classified as sales type lease. at the end of the lease term. Requirements: Compute for the following assuming the residual value is (1) guar anteed and (2) unguaranteed a. Gross investment in the lease on Januar y 1, 20x1 b. Net-inves tment in the lease on January 1, 20x1 c. Total interest income to be recognized over the lease term
Q: A college student, needs to borrow $5,000 today for his tuition bill. He agrees to pay back the loan...
A: Time period is 5 years Borrowed amount is $5,000 Amount to be paid is $7012.76 To Find: Nominal int...
Q: The formula below tells us how to obtain the maturity value on a simple discount loan if we are give...
A: Simple discount rate = 7.56% How many years for debt to double? Assuming Debt = 100 Future Value = 2...
Q: Asset W has an expected return of 13.6 percent and a beta of 1.37. If the risk-free rate is 4.62 per...
A: Return and Beta of portfolio can be calculated as: Portfolio Return = ∑(weight of assets * return of...
Q: If $1200 is due on September 25, 1976, find the present value on June 27, 1976, if the discount rate...
A: Present Value = Future Value / 1 + (r * t)Where r = 7%t = time = (27 June 1976 to 25 September 1976...
Q: Jenny has no assets, but she has $1,000 to invest in one of two stocks. Stock A has a beta of 1.2 an...
A: One of the approaches for determining the needed rate of return for equity capital is to utilize the...
Q: One year ago, your company purchased a machine used in manufacturing for $115,000. You have learned ...
A: Incremental Analysis: Incremental analysis is a technique that is used to compare two projects by ta...
Q: Find the compound interest if $2000 is invested for 12 years at 8% compounded quarterly. $3036 $1920...
A: Compound interest is the amount of interest which is charged or received on the principal or interes...
Q: Consider the following schedule: number of years 10; annual interest rate 6% Annual withdrawal of $5...
A: Given: Year With drawl Deposit 1 -$500 $10,000 2 -$500 3 -$500 4 -$500 5 -$500 $1...
Q: 2. I) Identify the concept of an optimal capital structure for a business firm. II) Analyse TWO (...
A: The question is based on the concept of capacity to the borrowing of a firm based on the concept of ...
Q: Fiat money has an intrinsic value based on the full faith and trust in government institutions. ...
A: Fiat money - This type of money is not backed by any commodity such as gold or silver , but such mo...
Q: If you save that money with interest rate of 10%, how much will it be after 20 years?
A: Future Value: It is the future worth of the present sum of money or stream of present annuity paymen...
Q: 433,895 ), 2022 3,000.00 3,002.00 2,808.00 2,818.00 2,870.19 290,250 P, 2022 3,080.00 3,132.00 3,032...
A: Prices of stock moves up and down according to the demand in the stock markets. Trends can be determ...
Q: What is the primary objective of the financial manager? How are they different from other manager
A: Financial manager is a person who is responsible for carrying out various financial functions of an...
Q: Which of the following would not be classified as a current asset? Prepaid expenses Plant, property ...
A: Current assets are those assets which are already in cash or can be converted into cash into short p...
Q: The cash price of a motorcycle is Php325,000. A fixed amount is to be paid at every end of the month...
A: Here, Cash Price of Motorcycle is Php325,000 Time Period (n) is 1.5 years Interest Rate (r) is 9% Co...
Q: What is this bond's annual coupon rate as of October 31, 2016?
A: Coupon Rate: It refers to the nominal yield paid by the issuer on fixed income security. It is compu...
Q: What are the drivers to the cost of revenue and the trends? b. Are there any trends in sales and ma...
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first t...
Q: The APY of $1,000 invested at 6% with semiannual compounding is O 6.18% O 6.09% O 6.00% O 6.14%
A: Interest rate (r) = 6% Number of compounding per year (m) = 2
Q: How many years are needed for P40,000 to yield P13,756.66 if invested at 6% converted semi-annually ...
A: Present value (PV)= 40,000 Interest amount = 13,756.66 Rate of interest = 6% Semi-annual interest ra...
Q: Please use the table above to answer the following questions: a. Discuss the trend analysis on how C...
A: a. Asset to equity ratio compared to 2018(0.81), increased in 2019(1.21) and again decreased in 2020...
Q: At what rate compounded monthly will P4,222 accumulate to P16,444 in 2 years and 10 months?
A: Yield to maturity can be calculated by following function in excel =RATE (nper, pmt, pv, [fv], [typ...
Q: ABC Corporation issued 12%, 1000-par value preference shares. Interest is payable quarterly. It will...
A: To Find: Value of preference share
Q: If an Australian based investor purchases a Euro-denominated Exchange Traded Fund (ETF) and the Euro...
A: ETF's or Exchange Traded Funds are the funds which are purchased and sold on a stock exchange very s...
Q: Main Content Net Revenue Years 1 Investment You are thinking about buying a new Hot Dog cart for $7,...
A:
Q: An annuity-immediate has 3 annual payments of $200, followed by a perpetuity of $300 starting in the...
A: The term "perpetuity" refers to an endless stream of financial flows. Money's value depreciates over...
Q: Loans You have a $6,000 credit card debt, and you plan to pay it off through monthly payments of $15...
A: Loan amount (PV) = $6000 Monthly payment (P) = $150 Interest rate = 15% Monthly interest rate (r) = ...
Q: Enchanted Company’s total assets fluctuate between P230,000 and P290,000. Total fixed assets remain ...
A: "Hi, Thanks for the Question. Since you asked multiple question, we will provide the answer of first...
Q: Selected information from the comparative financial statements of AppleVerse Company for the year en...
A: Receivables turnover ratio measures the number of times in a year the company collects its overdues....
Q: Question 2: Time Value of Money a. Suppose a rancher borrows $10,000 from a bank at a 7% rate for 5 ...
A: Money has time value and due to the interest rate and period the value of money grow with time. As...
Q: 1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid ...
A: Given: Particulars 30 years 15 years Years 30 15 Mortgage rate 5% 4.50% Down payment 20% 20...
Q: You want to endow a scholarship that will pay $7,000 per year forever, starting one year from now. I...
A: Annual payment (P) = $7000 Discount rate (r) = 5%
Q: Scenario Analysis and Portfolio Risk. The common stock of Leaning Tower of Pita Inc., a restaurant c...
A: Scenario analysis-It is a process of analyzing all possible events that could happen in the future ...
Q: During 2013, Rand Co. purchased P960,000 of inventory. The cost of goods sold for 2013 was P900,000,...
A: Inventory turnover ratio is one of the efficiency ratio which shows how many times inventory is sold...
Q: 1. Adam and his friend, Akmal, are both talented painters. Last year, they started painting postcard...
A: Breakeven point is the point at which the business will be able to cover both Fixed and Variable Cos...
Q: An investment will have a future value equal to Php180,250 after 6 years. It has a nominal rate of 1...
A: Time Value of money states that each dollar has earning capacity hence a dollar today is worth more ...
Q: Presented below are financial statements (except cash flows) for two not-for-profit organizations. N...
A: Answer - Part 1 - Program Expenses Ratio - = Total Program Service Expenses / Total Expenses. ...
Q: what are hedge funds role with direct listings?
A: A direct listing is a process by which a company can go public by selling existing shares instead of...
Q: Which of the following is the worst measure of the cost of debt? Estimating Interest Rate based on S...
A: The cost of debt is the effective return that a company pays for its debt to its debtholders. It is ...
Q: orksheet Net worksheet Using the information provided, complete Figure 1.1, Seller Net Worksheet. Se...
A: Seller Net Worksheet Various issues to consider.
Q: Imposing the same emissions standards on all polluters is cost-effective policy. True or False?
A: Imposing the same emission standard will violate the equi-marginal principle .
Q: 14.) The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $6...
A: The current price of a projected amount of money or series of payments with a predetermined rate of ...
Q: A Treasury bond that matures in 10 years has a yield of 6.25%. A 10-year corporate bond has a yield ...
A: Corporate bond yield = 10.75% Treasury bond yield (Risk free) = 6.25% Liquidity premium = 0.35%
Q: QUESTION: 2. What is the fair value for a six-month European call option with a strike price of $135...
A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for...
Q: A publicly listed traded company is in financial distress. It is projected to stop paying dividends ...
A: There are various valuation methods that can be used to value a comopany like discounted cash flow m...
Q: Please view the following video before answering this question. Video Solution: 03.03-PROO4 Click he...
A: Data given: Par value = $10,000 Coupon rate =8% p.a. (payable quarterly) n=3 years Period = 3*4 = 12...
Q: Elgin Battery Manufacturers had sales of $1,000,000 in 2015 and their cost of goods sold is $700,000...
A: Income taxes is the amount of taxes and obligations which needs to be paid by the individual or busi...
Q: Find the nominal rate of an investment with duration of 4 and a half years compounded once a year. T...
A: Time period is 4.5years Present value of investment is Php50,010 Future Value is Php60,072.82 To Fin...
Q: Owen’s Electronics has nine operating plants in seven southwestern states. Sales for last year were ...
A: New funds: When an organization has been in a growing stage it requires a lot of funds, through whi...
Q: Find the amount of an ordinary annuity of Php18,450 payable quarterly for 3.5 years at 12% compounde...
A: Answer - The future value annuity formula calculates the value at the end of given period i.e. n ...
Q: How will a decrease in time preferences affect the loanable funds market? A. There will be an...
A: Decrease in time preferences tells us that individuals in the economy are more patient and more incl...
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
- Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual lease payments of $1,510, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2016. Required Assume that the lease is treated as an operating lease. Will the value of the forklift appear on Koffmans balance sheet? What account will indicate that lease payments have been made? Assume that the lease is treated as a capital lease. Prepare any journal entries needed when the lease is signed. Explain why the value of the leased asset is not recorded at $6,040 (1,5104). Prepare the journal entry to record the first lease payment on December 31, 2016. Calculate the amount of depreciation expense for the year 2016. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2016?Problem 3. Direct Financing Lease with Residual Value On January 1, 20x1, ABC Financing Co leased equipment to XYZ, Inc. Information on the lease is shown below: Cost of Equipment P330, 647 5 years Useful Life of Equi pment Lease Term 4 years Annual Rent Payable at the end of each year 100,000 Interest Rate Implicit in the lease 10% Residual Value 20,000 The equipment will revert back to АВС at the end of the lease term. The lease is classified as direct financing lease. Requirements: Compute for the following assuming the residual value is (1) guar anteed and (2) unguaranteed a. Gross Investment in the lease on January 1, 20x1 Net Investment in the lease on January 1, 20x1 Unearned Interest income on January 1, 20x1 b. c. d. Prepare the journal entries on January 1, 20x1 and December 31, 20х1 е. Prepare the journal entry on December 31, 20x4 if the fair value of the residual value i. P20,000 ii. P5,000
- O e. $300,000 Jestion 3 For an operating lease, which statement is TRUE? ot yet swered Select one: ints out of O a. The Right of Use asset amortization amount will decrease each year. O b. Annual Lease Expense will be the amortization of the Right of Use asset less that year's interest expense. Flag question Oc. The recorded Lease Expense amount will be the same each year. O d. The annual amortization of the Right of Use asset will be debited to Amortization Expense each year. O e. To compute the cost of the Right of Use asset, the lessee will use the incremental rate, if known. estion 4 Indicate the type of Deferred Tax account created by Unearned Revenues and Accrued Revenues, respectively: yet wered Select one: nts out of O a. Asset, Asset O b. Liability, Asset O c.Asset, Liability O d. Liability, Liability Flag question stion 5 Which of the following requires intraperiod tax allocation? yet wered Select one: nts out of O a. Discontinued Operations Loss O b. Estimated Warranty…PROBLEM 3: Lease arrangement with GUARANTEED Residual ValueLazy Company leased an equipment with useful life of 6 years on January 1, 2020 for period of 5 years with fixed annual rental ofP600,000 which is to be paid at the end of each year. The lease contract provides that the lessee has guaranteed a P100,000 residualvalue of the leased asset. The implicit interest rate in the lease is 10%. REQUIRED: Prepare table of amortization and journal entriesfor the entire lease term.Problem 3: ABC Co. leased a new machine from XXX Inc. on January 1, 20X1, under a lease with the following information: Lease term 10 years Annual rent payable at the end of each year P 80,000 Useful life of the machine 12 years Implicit interest rate 14% Lessee’s incremental borrowing rate 12% The annual rental payment includes P 6,000 to cover maintenance costs. The maintenance costs transfer services to ABC. The amount charged reflects the stand alone selling price of the maintenance services. Requirements: Provide the entries in 20X1 and 20X2. Determine the current and non-current portions of the lease liability on December 31, 20X1.
- Direct Finance Lease - Lessor (PAS 17 and PFRS 16) Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details: Cost of Machinery Residual value – guaranteed Useful life and lease term P3,760,100 400,000 4 years 10% Implicit interest rate Annual rental is payable in advance on January 1 Required: Based on the result of your audit, determine the following: 1. Annual Rental 2. Gross Receivable or Investment 3. Unearned Interest 4. Interest Income on 2011 5. Carrying Value of Lease Receivable on January 1,2012Direct Finance Lease – Lessor (PAS 17 and PFRS 16)Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details:Cost of Machinery P3,760,100Residual value – guaranteed 400,000Useful life and lease term 4 yearsImplicit interest rate 10%Annual rental is payable in advance on January 1Required: Based on the result of your audit, determine the following:____________1. Annual Rental____________2. Gross Receivable or Investment____________3. Unearned Interest____________4. Interest Income on 2011____________5. Carrying Value of Lease Receivable on January 1,2012Example: A company leased an asset to another company on 1 January 20X1 on the following terms. Lease term 4 years Inception of lease 1.1.X1 Annual instalments in advance Rs. 22,000 Residual value of asset as guaranteed by lessee Rs. 10,000 Expected residual value at end of lease Rs. 12,000 Fair value of the asset Rs. 82,966 Initial direct costs incurred by the lessor Rs. 700 Interest rate implicit in the lease 11% Requirements a) Calculate the unguaranteed residual value and the net investment in the lease as at 1 January 20X1 b) Prepare extracts from the financial statements of the lessor for the year ended 31.12.X1 (excluding notes)
- b. Net investment in the lease on January 1, 20x1 d. - Sales, Cost of sales, and Gross profit recognized o Sales type lease 2. On January 1, 20x1, Soap Financing Co. leased a machine to Sanitizer, Inc. Information on the lease is shown below. Cost of machine P600,00 Useful life of machine 5 years 4 years Lease term Annual rent payable ạt the end of each year P200,00 Market rate of interest 10% Residual value at the end of the lease term P40,000 term. The lease is classified as sales type lease. value is (1) Guaranteed and (2) Unguaranteed: a. Gross investment in the lease on January 1, 20x1 b. Net investment in the lease on January 1, 20×1 Soap Co. over the lease term on the lease E. Journal entries in Soap's books at the commencemenProblem 5. Operating Lease- Lessor On January 1, 20x1, Lessor entered into an operating lease. Information follows: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to cover for Costs of administrative tasks Additional rent of 10% is to be paid for any excess of sales of Lessee over P1,000, 000. Lessee's sales for 20x1 are P1, 100, 000. The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual de preciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.Problem 5. Operating Lease- Lessor On January 1, 2 0x1, Lessor entered into operating lease. an Information followS: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to Cover for costs of administrative tasks is to be paid for any excess of sales of Lessee over P1,000,000. Lessee's sales for 20x1 are P1, 100, 000. Additional rent of 10% The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual depreciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.