Question

In: Accounting

On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance...

On January 1, 2018, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: (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.)

Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance
2018 388,229
2018 43,000 43,000 345,229
2019 43,000 37,975 5,025 340,204
2020 43,000 37,422 5,578 334,626
2021 43,000 36,809 6,191 328,435
2022 43,000 36,128 6,872 321,563
2023 43,000 35,372 7,628 313,935
— — — — —
— — — — —
— — — — —
2035 43,000 16,314 26,686 121,619
2036 43,000 13,378 29,622 91,997
2037 43,000 10,120 32,880 59,117
2038 65,620 6,503 59,117 0


Required:

1. What is the lease term in years?
2. What is the asset’s residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.)
3. What is the effective annual interest rate? (Round your percentage answer to 1 decimal place.)
4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.)
5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.)
6. What is United’s net investment at the beginning of the lease (after the first payment)? (Round your answers to nearest whole dollar.)
7. What is United’s total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.)
8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest whole dollar.)

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

On January 1, 2018, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease....
On January 1, 2018, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance 191,981 2018 20,500 0 20,500 171,481 2018 20,500 17,148 3,352 168,129 2019 20,500 16,813 3,687 164,442 2020 20,500...
On January 1, 2018, Morris Production leased a machine from Werner Leasing under a finance lease....
On January 1, 2018, Morris Production leased a machine from Werner Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Morris. Portions of the Werner Leasing's lease amortization schedule appear below: Jan. 1 Payments Effective Interest Decrease Outstanding in Balance Balance 374,596 2018 40,000 40,000 334,596 2018 40,000 33,460 6,540 328,056 2019 40,000 32,806 7,194 320,861 2020 40,000 32,086...
On January 1, 2018, Gemini Corporation leased equipment under a finance lease designed to earn the...
On January 1, 2018, Gemini Corporation leased equipment under a finance lease designed to earn the lessor a 12% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $225,000 beginning January 1, and each December 31 thereafter through 2026. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $15,000 per year. Insurance premiums of $12,000 annually are related to the equipment. Both amounts were to...
On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease...
On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 13% rate of return for providing long-term financing. The lease agreement specified: Ten annual payments of $68,000 beginning January 1, 2018, the beginning of the lease and each December 31 thereafter through 2026. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $380,163. The lease qualifies as a...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $22,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $189,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $31,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $234,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $32,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $27,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $198,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $26,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescent at a cost of $189,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT