$7\mathrm{.}3$ Part A

$0\mathrm{.}0/4\mathrm{.}0$ points $($graded$)$

In the early years of a lease, net income is

under the finance lease classification.

Select an option $v$

This is because:

Early years of finance lease have greater total interest expense and depreciation expense.

Early years of operating lease have greater total interest expense and depreciation expense.

Both operating leases and finance leases have the same total interest expense and depreciation expense.

None of the above

You have used $0$ of $1$ attempt

For Parts B and C$,$ type your answer to the nearest millions of dollar with two decimals. Do not include commas or dollar

signs in your answer. $($i$.$e If the answer is $-$$$500,350,000$ then type $"-500\mathrm{.}35")$

Note that the following questions involve time value of money calculations. There are many ways to do this $($formulas$,$ PV

tables, Microsoft Excel$).$ We have provided discount factor tables for you similar to those found in the textbook, however, you

are not required to use these if you prefer one of the other methods.

Lump sum present value table provided here.

Ordinary annuity present value table provided here. Part B

$\frac{0\mathrm{.}0}{10\mathrm{.}0}$ points $($graded$)$

Recall that there is a new standard for leases. Suppose that Zoltan executes a new $8$ year lease on January $1,2021,$ and

accounts for it using the new standard. The $8$ payments on the lease are $$20$ million per year, and are due each December

The terms of the lease are summarized below:

Annual lease payment: $$20$ million

Term of lease: $8$ years

Interest rate: $6\%$

Lease commences on: January $1,2021$

Payments due: December $31$ of each year in the lease term

a$.$ Use the BSE to identify the transaction$($s$)$ Zoltan would record on January $1,2021,$ assuming the lease is classified as a

finance lease.

Cash Assets $+$ Non$-$Cash Assets $=$ Liabilities $+$ Contributed Capital $+$ Shareholders Equity

b$.$ Use the BSE to identify the transaction$($s$)$ Zoltan would record on January $1,2021,$ assuming the lease is classified as an

operating lease.

Cash Assets $+$ Non$-$Cash Assets $=$ Liabilities $,+$ Contributed Capital $+$ Shareholders Equity Part C

$\frac{0\mathrm{.}0}{10\mathrm{.}0}$ points $($graded$)$

Suppose that Zoltan executes a new $7$ year lease on January $1,2021,$ and accounts for it using the new standard. The $7$

payments on the lease are $$25$ million per year, and are due each December $31.$ The terms of the lease are summarized

below:

Annual lease payment: $$25$ million

Term of lease: $7$ years

Interest rate: $6\%$

Lease commences on: January $1,2021$

PV of Lease: $$139\mathrm{.}56$ million

a$.$ Use the BSE to identify the transaction$($s$)$ Zoltan would record on December $31,2022,$ assuming the lease is classified as

a finance lease.

Cash Assets $+$ Non$-$Cash Assets $=$ Liabilities $,+$ Contributed Capital $+$ Shareholders Equity

b$.$ Use the BSE to identify the transaction$($s$)$ Zoltan would record on December $31,2022,$ assuming the lease is classified as

an operating lease.

Cash Assets $+$ Non$-$Cash Assets $=$ Liabilities $+$ Contributed Capital $+$ Shareholders Equity Part D

$\frac{0\mathrm{.}0}{2\mathrm{.}0}$ points $($graded$)$

Finally, suppose instead that the above lease was initiated in January $1,2017$ and the old standard was used to account for

it$.$ What amount of liability would Zoltan record on January $1,2017,$ assuming the lease is classified as an operating lease?

Same as part A of Question $2($above$)$

$$0$

$$100$ million

Not enough information

You have used $0$ of $1$ attempt

Save