Question
A firm signed an operating lease for 10 years with annual payments of $6,000 to be remitted at the end of each year. The interest
A firm signed an operating lease for 10 years with annual payments of $6,000 to be remitted at the end of each year. The interest rate is 5%.
a. Whats the financial statement effect at the inception of the lease (you can round to the dollar)?
| Assets | = | Liabilities | + | Equity |
| Sales | - | Expenses | = | Profit | |||
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b. Whats the financial statement effect from the first year of the lease - for simplicity assume the financial statements are only prepared annually so you dont need to worry about any quarterly adjustments, just show the annual numbers.
| Assets | = | Liabilities | + | Equity |
| Sales | - | Expenses | = | Profit | |||
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c. Would the Net Income in year 1 be higher or lower if this was a finance lease (just give direction you do NOT have to give amount)?
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Financial Accounting Fundamentals
Authors: John J. Wild
8th Edition
1260728609, 9781260728606
