On January 1, Moran Inc. entered into a noncancelable 10 -year lease for computer equipment with a
Question:
On January 1, Moran Inc. entered into a noncancelable 10 -year lease for computer equipment with a fair value of $120 million and requiring annual $16.304 milion year-end lease payments. The company's year-end is December 31. The implicit interest rate is 6%. Required 1. Assuming that the lease is accounted for as a finance lease, what financial effects will be recorded in the financial statements with regard to the lease on January 1? Note: Use Excel and round to the nearest million (i.e. show 128.543 as 129) A Finance lease asset and a finance lease liability will be capitalized on the balance sheet for: $Answer million. 2. Assuming that the lease is accounted for as a finance lease, what financial effects will be recorded with regard to the lease on December 31 (at the end of the first year)? Note: Round all entries to three decimal points. Use rounded amounts in any further calculations.
Item | Increase/Decrease | ||
---|---|---|---|
Cash | AnswerIncreaseDecrease | Answer | million |
Interest expense | AnswerIncreaseDecrease | Answer | million |
Lease obligation | AnswerIncreaseDecrease | Answer | million |
Amortization expense | AnswerIncreaseDecrease | Answer | million |
Leased asset | AnswerIncreaseDecrease | Answer | million |
3. What are the total expenses associated with the lease in the second year if it is accounted for as an operating lease? As a finance lease? Note: Round all entries to three decimal points.
Expense Item (millions) | Operating Lease | Finance Lease |
---|---|---|
Operating lease expense | Answer | Answer |
Interest expense | Answer | Answer |
Amortization expense | Answer | Answer |
Total | Answer | Answer |
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson