Question
In: Accounting
(Show Work and Calculations) On December 31, 2016, Larkspur Corporation signed a 5-year, non-cancelable lease for...
(Show Work and Calculations)
On December 31, 2016, Larkspur Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Larkspur to make annual payments of $9,399 at the beginning of
each year, starting December 31, 2016. The machine has an estimated
useful life of 6 years and a $4,700 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Larkspur uses the straight-line method of depreciation for
all of its plant assets. Larkspur’s incremental borrowing rate is
6%, and the lessor’s implicit rate is unknown.
1. What type of lease is this
2. Compute the present value of the lease payments.
Solutions
Expert Solution
1) The type of lease is operating Lease. Operating lease is that other than finance lease.
Finance lease is a lease in which substantially all the risk and reward incidental to ownership is transferred.
2) Present Value of Lease Payments
Year Cash Flow PVF@6% Discounted Cash flow
0 $9,399 1 $9,399
1-5 $9,399 4.2124 $39,592
6 $4,700 0.7049 $3,313.03
Present Value of Lease Payments $52,304
ekkarill92 answered 1 month agoRelated Solutions
On December 31, 2019, Larkspur Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, Larkspur Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Larkspur to make annual payments of $8,560 at the beginning of
each year, starting December 31, 2019. The machine has an estimated
useful life of 6 years and a $4,800 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Larkspur uses the straight-line method of depreciation for
all of its plant...
On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, Kingbird Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Kingbird to make annual payments of $7,924 at the beginning of
each year, starting December 31, 2019. The machine has an estimated
useful life of 6 years and a $5,200 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Kingbird uses the straight-line method of depreciation for
all of its plant...
On December 31, 2019, Windsor Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, Windsor Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Windsor to make annual payments of $9,353 at the beginning of
each year, starting December 31, 2019. The machine has an estimated
useful life of 6 years and a $4,800 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Windsor uses the straight-line method of depreciation for all
of its plant...
On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, Kingbird Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Kingbird to make annual payments of $8,508 at the beginning of
each year, starting December 31, 2019. The machine has an estimated
useful life of 6 years and a $4,700 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Kingbird uses the straight-line method of depreciation for
all of its plant...
On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, Kingbird Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Kingbird to make annual payments of $8,508 at the beginning of
each year, starting December 31, 2019. The machine has an estimated
useful life of 6 years and a $4,700 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Kingbird uses the straight-line method of depreciation for
all of its plant...
A lessor has signed a non-cancelable 5-year lease of a warehouse with a lessee: • The...
A lessor has signed a non-cancelable 5-year lease of a warehouse
with a lessee:
• The lessor believes that the lessee will make all 5 of the
beginning-of-the-year rentals of $62,018 each, i.e., the lessor
believes collection of the rentals is probable.
• The structure has an estimated useful life of 40 years, and at
the end of the lease, it will be returned to the lessor, who plans
to maintain it for storage of idled machinery.
• The warehouse...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a
10-year, non-cancelable lease agreement to lease a storage building
from Sheffield Storage Company. The following information pertains
to this lease agreement: 1. The agreement requires equal rental
payments of $66,999 beginning on December 31, 2016. 2. The fair
value of the building on December 31, 2016 is $490,629. 3. The
building has an estimated economic life of 12 years, a guaranteed
residual value of $11,000, and an expected residual value...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a
10-year, non-cancelable lease agreement to lease a storage building
from Sheffield Storage Company. The following information pertains
to this lease agreement: 1. The agreement requires equal rental
payments of $66,999 beginning on December 31, 2016. 2. The fair
value of the building on December 31, 2016 is $490,629. 3. The
building has an estimated economic life of 12 years, a guaranteed
residual value of $11,000, and an expected residual value...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease...
Assume that on December 31, 2016, Kimberly-Clark Corp. signs a
10-year, non-cancelable lease agreement to lease a storage building
from Sheffield Storage Company. The following information pertains
to this lease agreement: 1. The agreement requires equal rental
payments of $66,199 beginning on December 31, 2016. 2. The fair
value of the building on December 31, 2016 is $484,368. 3. The
building has an estimated economic life of 12 years, a guaranteed
residual value of $10,000, and an expected residual value...
On January 1,2020. The leasing co. (The lessor) signed a 5-year, non cancelable lease with Dexter...
On January 1,2020. The leasing co. (The lessor) signed a 5-year,
non cancelable lease with Dexter Inc.(the lessee). The terms of the
lease are:
(a) Lease payments of $62,700 are made on January 1 of each
year.
(b) the annual lease payments include $12,700 of property
taxes.
(c)the present value of the annual minimum lease payments is
equal to the fair market value of the building at the inception of
the lease.
(d) the building has an estimated life of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Discuss the differences among the terms cultural awareness, cultural sensitivity, cultural relevancy, cultural competence, and cultural...
- 1- Suppose you were tasked with developing the customer service qualities required for an external customer...
- History of Present Illness MDJ is a 50-year-old woman whose routine mammogram showed a 2.3 -...
- For a spherical thermal reactor with a water moderator in a homogeneous mixture, what is the...
- How do autobiographical memories change across the lifespan? That is, what is the relationship between one’s...
- Create a Binary Search Tree with the following elements in the order mentioned below: 5, 85,...
- write a MIPS program to ask user to input the number of elements of array
ADVERTISEMENT