Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 Leasings lease amortization schedule appear below:

Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance
210,711
2018 22,500 22,500 188,211
2018 22,500 18,821 3,679 184,532
2019 22,500 18,453 4,047 180,485
2020 22,500 18,049 4,451 176,034
2021 22,500 17,603 4,897 171,137
2022 22,500 17,114 5,386 165,751
2023 22,500 16,575 5,925 159,826
2035 22,500 5,596 16,904 39,051
2036 22,500 3,905 18,595 20,456
2037 22,500 2,046 20,456 0

Required:

1. What is Majestics lease liability at the beginning of the lease (after the first payment)? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

2nd Edition

0471347744, 978-0471347743

More Books

Students also viewed these Accounting questions

Question

Describe four issues that affect career management

Answered: 1 week ago