Question

In: Accounting

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 be paid by the lessor and the lease payments reflect both expenditures. At what amount will Gemini record a right-of-use asset? (Round your answer to the nearest whole dollar amount.)

a. $1,423,856

b. $1,139,085

c. $1,234,009

d. $1,328,932

Solutions

Expert Solution

Answer = a. $1,423,856

Detailed Calculation

Year Date Lease Payment Maintainance Insurance PV Factor @ 12% Present Value
1 01-01-2018           2,25,000              15,000         12,000 0.8929         2,25,000
2 01-01-2019           2,25,000              15,000         12,000 0.7972         2,00,893
3 01-01-2020           2,25,000              15,000         12,000 0.7118         1,79,369
4 01-01-2021           2,25,000              15,000         12,000 0.6355         1,60,151
5 01-01-2022           2,25,000              15,000         12,000 0.5674         1,42,992
6 01-01-2023           2,25,000              15,000         12,000 0.5066         1,27,671
7 01-01-2024           2,25,000              15,000         12,000 0.4523         1,13,992
8 01-01-2025           2,25,000              15,000         12,000 0.4039         1,01,779
9 01-01-2026           2,25,000              15,000         12,000 0.3606             90,874
10 01-01-2027           2,25,000              15,000         12,000 0.3220             81,137
Present Value       14,23,856

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

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...
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, 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....
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...
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 $29,000 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 $216,000 (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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT