Question

QUESTION 23 Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual...

QUESTION 23

Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at the end of the first year. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is not known by Pisa, Inc.) is 8%. Pisa, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Pisa, Inc. in the first year of the asset’s life?

PV Annuity Due PV Ordinary Annuity

8%, 4 periods 3.57710 3.31213

10%, 4 periods 3.48685 3.16986




$0 because the asset is amortized by Tower Company.


$284,968


$307,767


$300,000

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2017. The lease agreement called for...
Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2017. The lease agreement called for annual rental payments of $1,141 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 8 years, a fair value of $9,400, a book value of $7,400, and Blue expects a residual value of $6,900 at the end of the lease term. Blue set the lease payments with the intent of earning a 7% return, though...
Grouper Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not...
Grouper Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $36,000 at the beginning of each year, and Kingston’s incremental borrowing rate is 8%, which is...
Eastern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Other information: Lease term...
Eastern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Other information: Lease term 4 years Annual payments $86,000 on January 1 each year Life of asset 4 years Implicit interest rate 9% PV, annuity due, 4 periods, 9% 3.5313 PV, ordinary annuity, 4 periods, 9% 3.2397 Hi-Tech's cost of the equipment $303,692 There is no expected residual value. Required: Prepare appropriate journal entries for Hi-Tech Leasing for 2018 and 2019. Assume a December 31 year-end. (If no...
DeRozan Corp. manufactured equipment at a cost of $331,001 and leased it to B Corp. on...
DeRozan Corp. manufactured equipment at a cost of $331,001 and leased it to B Corp. on January 1, 2019, for an eight-year period expiring December 31, 2026. The asset’s economic life is 10 years. Equal payments under the lease are $63,400 and are due on January 1 of each year. The first payment was made on January 1, 2019. The implicit rate used by Derozan is 8%. Additional information:                                             Present value of an annuity due of $1 for 8 periods...
Kingston Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not...
Kingston Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $35,000 at the beginning of each year, and Kingston’s incremental borrowing rate is 6%, which is...
Francisco leased equipment from Julio on December 31, 2021. The lease is a 10-year lease with...
Francisco leased equipment from Julio on December 31, 2021. The lease is a 10-year lease with annual payments of $155,000 due on December 31 of each year beginning December 31, 2021. The present value of the lease payments is $1,123,268. Francisco's incremental borrowing rate is 10% for this type of lease. The implicit rate of 8% is known by the lessee. What should be the balance in Francisco lease liability at December 31, 2022? Multiple Choice $968,268. $897,239. $885,729. $890,729....
Pina Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not...
Pina Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Prepare Pina’s journal entries on January 1, 2017, and December 31, 2017. Assume the annual lease payment is $37,000 at the...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $681,881 over a 4-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 9.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.2 million. (FV of $1, PV...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $478,767 over a 4-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 9.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.8 million. (FV of $1, PV...
Francisco leased equipment from Julio on December 31, 2018. The lease is a 10-year lease with...
Francisco leased equipment from Julio on December 31, 2018. The lease is a 10-year lease with annual payments of $158,000 due on December 31 of each year beginning December 31, 2018. The present value of the lease payments is $1,130,000. Francisco's incremental borrowing rate is 12% for this type of lease. The implicit rate of 11% is known by the lessee. What should be the balance in Francisco lease liability at December 31, 2019? Multiple Choice $972,000. $920,920. $927,430. $919,420.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT