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Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 8%
Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 8% was $61,600. Ten annual lease payments of $8500 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $53,500, and its retail fair value was $61,600. The total decrease in earnings (pretax) in Karla's December 31, 2021, income statement would be (ignore taxes): A) $5204. B) $3296. C) $6376. D) $4928. 1) Titanic Corporation leased executive limos under terms of a $14,000 first payment upon signing the lease and four equal annual payments of $21,000 on the anniversary date of the lease. The interest rate implicit in the lease is 9%. The first year's interest expense would be: (FV of $1, PV of $1, FVA of $L PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable Cash Effective Decrease Outstanding Payment Payment Interest in balance Balance 87,867 1 13,000 13,000 74,867 2 13,000 7487 5513 69,354 3 13,000 6935 6065 63,289 4 13,000 6329 6671 56,618 5 13,000 5662 7338 49,280 6 13,000 4928 8072 41,208 7 13,000 4121 8879 32,329 8 13,000 3233 9767 22,562 9 13,000 ? ? 7 10 13,000 ? ? ? What would be the outstanding balance after payment 10? A) $1182. B) $11,818. C) $0. D) $13,000
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