Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On June 30, 2018, Blue, Inc. leased a machine from Big Leasing Corporation. The lease agreement qualifies as a capital lease and calls for Blue

On June 30, 2018, Blue, Inc. leased a machine from Big Leasing Corporation. The lease agreement qualifies as a capital lease and calls for Blue to make semiannual lease payments of $212,190 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Blues incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. The lease agreement qualifies as a finance lease. Amortization is recorded on a straight-line basis at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required: 1. Determine the present value of the lease payments at June 30, 2018, (to the nearest $000) that Blue uses to record the right-of-use asset and lease liability. 2. What would be the amounts related to the lease that Blue would report in its balance sheet at December 31, 2018? (Ignore taxes.) 3. What would be the amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2018? (Ignore taxes.) (For all requirements, round your answers to the nearest whole dollar amounts.)

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

Economics, Accounting And The True Nature Of Capitalism Capitalis Ecology And Democracy

Authors: Jacques Richard, Alexandre Rambaud

1st Edition

1032046589, 9781032046587

More Books

Students also viewed these Accounting questions