On January 1, Year 1, Satchmo leases a kibble machine from Pops! Inc. Pops! Inc. is...
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On January 1, Year 1, Satchmo leases a kibble machine from Pops! Inc. Pops! Inc. is a. dealer in used and new kibble machines 1. Satchmo will pay $10,000 at the beginning of each year. 2. Satchmo's borrowing rate and Pops! implied rate are both 10% 3. The machine is carried in Pops! Inc.'s inventory at $18,000. 4. At the end of the lease the machine will be returned to Pops! Inc. with a guaranteed residual value of $1,500. 5. Satchmo expects the value to be only $500. Provide the entries for all three years. Suppose instead of 4 and 5 there is a bargain purchase of $1,500 at the end of year 3 and the asset has an economic life of 5 years with zero residual value. On January 1, Year 1, Satchmo leases a kibble machine from Pops! Inc. Pops! Inc. is a. dealer in used and new kibble machines 1. Satchmo will pay $10,000 at the beginning of each year. 2. Satchmo's borrowing rate and Pops! implied rate are both 10% 3. The machine is carried in Pops! Inc.'s inventory at $18,000. 4. At the end of the lease the machine will be returned to Pops! Inc. with a guaranteed residual value of $1,500. 5. Satchmo expects the value to be only $500. Provide the entries for all three years. Suppose instead of 4 and 5 there is a bargain purchase of $1,500 at the end of year 3 and the asset has an economic life of 5 years with zero residual value.
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First lets calculate the present value of the lease payments using the borrowing rate of 10 and the ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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