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Required: What would be the pretax amounts related to the lease that Wilson would report in its statement of cash flows for the year ended
Required: What would be the pretax amounts related to the lease that Wilson would report in its statement of cash flows for the year ended December 31, 2018?
Wilson Foods Corporation leased a commercial food processor on September 30, 2018. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $78,310, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2018. Wilson's incremental borrowing rate is 12%. Wilson records depreciation on a straight-line basis at the end of each fiscal year. Wilson recorded the lease as follows: September 30, 2018 Right-of-use asset (calculated below) Lease payable (calculated below) 1,200,000 1,200,000 Lease payable Cash (first payment) 78,310 78,310 Calculation of the present value of lease payments $78,310 x 15.32380* $1,200,000 (rounded) *Present value of an annuity due of $1: n 20, i= 3% Item Reported in Statement of Cash Flows as Amount Disclosure notes for Statement of Cash Flows Right-of-use asset Lease payments Outflow from financing activities Principal Outflow from operating activities InterestStep by Step Solution
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