Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period.Equal annual payments under the lease are $370000 and are due on January 1 of each year. The first payment was made on January 1,2025. The implicit rate of interest contemplated by Martinez Equipment Leasing and known to Cullumber Healthcare is 8%.Cullumber's incremental borrowing rate is 12%. The cost of the equipment on Martinez Equipment Leasing accounting records was$820000. Assuming that the lease is appropriately recorded as an operating lease, at what amount is the lease recorded on CullumberHealthcare System's books on January 1, 2025?PV Annuity Due PV Ordinary Annuity PV Single Sum8%, 4 periods3.577103.312130.7350312%, 4 periods3.401833.037350.63552no entry to record an operating lease.$1323527$1480000$789167

To calculate the present value (PV) of the lease liability on Cullumber Healthcare System's books,…

Answered: Martinez Equipment Leasing Company…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 16P

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Flounder Equipment Leasing Company leased equipment to Pharoah Healthcare System on January 1, 2025, for a four- year period. Equal annual payments under the lease are $560000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Flounder Equipment Leasing and known to Pharoah Healthcare is 8%. Pharoah's incremental borrowing rate is 11%. The cost of the equipment on Flounder Equipment Leasing accounting records was $680000. Assuming that the lease is appropriately recorded as an operating lease, what is the amount of profit on the sale that Flounder Equipment Leasing would record for the year ended December 31, 2025? 8%, 4 periods 11%, 4 periods $1323176 $509091 O $629091 $0 PV Annuity Due PV Ordinary Annuity PV Single Sum 3.57710 0.73503 3.44371 3.31213 3.10245 0.65873
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgla-Atlantic to make semiannual lease payments of $414,921 over a five-year lease term (also the asset's useful life). payable each June 30 and December 31, with the first payment on June 30, 2024. Georgla-Atlantic's incremental borrowing rate is 8%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $3.5 million. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $509,761 over a five-year lease term (also the asset's useful life). payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 8% the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.3 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report In Its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its Income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $677,829 over a four-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.6 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
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On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $779,224 over a three-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 9%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.2 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $779,224 over a three-year lease term (also the asset’s useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 9%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.2 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. What is the pretax amount of net receivable? 2. What is pretax amount of interest revenue? Ignore taxes for both questions
* Your answer is incorrect. Sarasota Equipment Leasing Company leased equipment to Sunland Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are $580000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Sarasota Equipment Leasing and known to Sunland Healthcare is 8%. Sunland's incremental borrowing rate is 12%. The cost of the equipment on Sarasota Equipment Leasing accounting records was $780000. Assuming that the lease is appropriately recorded as an operating lease, on January 1 of each year when the payment is received and recorded by Sarasota Equipment Leasing Company as a debit to Cash, there would also be a: 8%, 4 periods 12%, 4 periods PV Annuity Due PV Ordinary Annuity PV Single Sum 3.57710 3.31213 0.73503 3.40183 3.03735 credit to Lease Revenue of $580000. credit to Accumulated Depreciation of $580000. O credit to Unearned Lease Revenue of…
On January 1, 2021, Worcester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased the equipment from Wellesley Harvester at a cost of $958,158. Worcester's borrowing rate for similar transactions is 10%.The lease agreement specified four annual payments of $200,000 beginning January 1, 2021, the beginning of the lease, and on each December 31 thereafter through 2023. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $697,370.On January 1, 2023 (after two years and three payments), Worcester and Newton agreed to extend the lease term by two years. The market rate of interest at that time was 9%. (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. Prepare the appropriate entries for Worcester Construction on January 1, 2023, to adjust its lease liability for the lease…
Werner Chemical, Incorporated, leased a protein analyzer on September 30, 2024. The five-year lease agreement calls for Werner to make quarterly lease payments of $355,655, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. Werner's incremental borrowing rate is 16%. Amortization is recorded on a straight-line basis at the end of each fiscal year. The useful life of the equipment is five years. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Determine the present value of the lease payments on September 30, 2024. What pretax amounts related to the lease would Werner report in its balance sheet on December 31, 2024? What pretax amounts related to the lease would Werner report in its income statement for the year ended December 31, 2024? What pretax amounts related to the lease would Werner report in its statement of cash flows for the year…
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset’s useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Inc. at a cost of $3 million.Required:1. What amount related to the lease would IC report in its balance sheet at December 31, 2021 (ignore taxes)?2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2021 (ignore taxes)?
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