On June 30, 2013, Papa Phil Inc. leased 200 pizza ovens for its chain of restaurants from
Question:
On June 30, 2013, Papa Phil Inc. leased 200 pizza ovens for its chain of restaurants from IC Leasing Corporation. The lease agreement calls for Papa Phil to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2013. IC calculated lease payment amounts using a 10% interest rate. IC purchased the pizza ovens from Pizza Inc. at their retail price of $3 million.
Required:
1. Determine the present value of the lease payments at June 30, 2013 (to the nearest $000) that Papa Phil uses to record the right-of-use asset and lease liability.
2. What pretax amounts related to the lease would Papa Phil report in its balance sheet at December 31, 2013?
3. What pretax amounts related to the lease would Papa Phil report in its income statement for the year ended December 31, 2013?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
1 Calculation of the present value of lease payments 562907 x 532948 3000000 rounded Present value o...View the full answer
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
