Question

Suppose an operating lease calls for annual payments of $500,000 for six years. If you were...

Suppose an operating lease calls for annual payments of $500,000 for six years. If you were to capitalize that lease, what would be the interest expense on the Income Statement in Year 3? Assume a discount rate of 6%.

A.

$86,723
B.

$103,953
C.

$118,552
D.

$72,851
E.

$99,854
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Correct answer: B. 103,953

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. (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: a. Determine the present value of the lease upon the...
A lease agreement that qualifies as a capital lease calls for annual lease payments of $30,000...
A lease agreement that qualifies as a capital lease calls for annual lease payments of $30,000 over a four-year lease term, with the first payment at January 1, the lease’s inception. The interest rate is 8% (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.)    Complete the amortization schedule for the first two payments. Date Lease Payable Interest Expense Decrease in Balance...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $10,000...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $10,000 over a five-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 4%. (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: a. Determine the present value of the lease upon the...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 8%. (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: a. Complete the amortization schedule for the first two payments....
A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000 over a five-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 4%. (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: a. Determine the present value of the lease upon the...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $60,000...
A lease agreement that qualifies as a finance lease calls for annual lease payments of $60,000 over a five-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. (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: a. Determine the present value of the lease upon the...
Ajax Inc. has entered into an operating lease that calls for 5 equal payments of $15,000...
Ajax Inc. has entered into an operating lease that calls for 5 equal payments of $15,000 each year, payable at the beginning of the year. The implicit interest rate of the lease is 3.5 percent per year. The present value of the lease is $70,096.19. If the interest portion of the third $15,000 payment is $1,470.86, what would be the principal portion of that payment and the asset amortization amounts for the second year? Question 4 options:
The Harris Company is the lessee on a four-year lease with the following payments at the...
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 20,000 Year 2: $ 25,000 Year 3: $ 30,000 Year 4: $ 35,000 An appropriate discount rate is 7 percentage, yielding a present value of $91,718. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? a-2. If the lease is an operating lease, what will be the initial...
The Harris Company is the lessee on a four-year lease with the following payments at the...
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 17,000 Year 2: $ 22,000 Year 3: $ 27,000 Year 4: $ 32,000 An appropriate discount rate is 7 percentage, yielding a present value of $81,556. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? a-2. If the lease is an operating lease, what will be the initial...
The Harris Company is the lessee on a four-year lease with the following payments at the...
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 11,000 Year 2: $ 16,000 Year 3: $ 21,000 Year 4: $ 26,000 An appropriate discount rate is 7 percentage, yielding a present value of $61,233. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? a-2. If the lease is an operating lease, what will be the initial...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT