1. The Lessor Company leases equipment to Lessee Company on January I of Year I. Terms of the equipment lease include the following: Lease term 5 years. Economic life of the asset - 6 years. Annual lease payment to be paid January I each year beginning Year 1 = 200,000. Guaranteed residual value of the equipment = 5,000. Lessee's estimate of residual value = 5,000. Lessee's incremental borrowing rate = 10% Lessor's implicit rate of return, known to the Lessee = 8%. Present value of minimum lease payments = 5862,426. The equipment reverts to Lessee Company at the end of the lease. Straight-line method used for amortization What is amount interest expense that lessee company record for year 2? A.41234 B.28532 C. 79,618 D. 86,243 E. NONE 2. The Lessor Company leases equipment to Lessee Company on January 1 of Year 1. Terms of the equipment lease include the following: Lease term = 5 years. Economic life of the asset = 6 years. Annual lease payment to be paid January I each year beginning Year 1 =$160,000, Guaranteed residual value of the equipment =$150,000. Lessee's estimate of residual value = $50,000 Lessee's incremental borrowing rate = 10% Lessor's implicit rate of return=8% Lessor's implicit rate of retum is unknown to the Lessee. What amount should Lessee Company record for the Right-of-Use Asset on January 1. Year 1? A. 667178 B. 729270 C.757999 D. 706892 E. NONE 3. The following information relates to Pepper Company. Pepper's fiscal year ends September 30. Pepper did not have any temporary or permanent differences for 2018, 2019, or 2020. Pepper's taxable income for its first three years of operations are as follows: 2018 344,000 2019 (558,000) 2020 650,000 Pepper's tax rate is 34% for 2018 and 2019. The enacted tax rate for 2020 is 38% and all future years. Pepper was certain that it would recover the full tax benefit of the Net Operating Loss (NOL). What did Pepper report as income tax payable for 2020 after application of the NOL? A. 34960 B. 49400 C. 63840 D. 189720 E.NONE 1. The Lessor Company leases equipment to Lessee Company on January I of Year I. Terms of the equipment lease include the following: Lease term 5 years. Economic life of the asset - 6 years. Annual lease payment to be paid January I each year beginning Year 1 = 200,000. Guaranteed residual value of the equipment = 5,000. Lessee's estimate of residual value = 5,000. Lessee's incremental borrowing rate = 10% Lessor's implicit rate of return, known to the Lessee = 8%. Present value of minimum lease payments = 5862,426. The equipment reverts to Lessee Company at the end of the lease. Straight-line method used for amortization What is amount interest expense that lessee company record for year 2? A.41234 B.28532 C. 79,618 D. 86,243 E. NONE 2. The Lessor Company leases equipment to Lessee Company on January 1 of Year 1. Terms of the equipment lease include the following: Lease term = 5 years. Economic life of the asset = 6 years. Annual lease payment to be paid January I each year beginning Year 1 =$160,000, Guaranteed residual value of the equipment =$150,000. Lessee's estimate of residual value = $50,000 Lessee's incremental borrowing rate = 10% Lessor's implicit rate of return=8% Lessor's implicit rate of retum is unknown to the Lessee. What amount should Lessee Company record for the Right-of-Use Asset on January 1. Year 1? A. 667178 B. 729270 C.757999 D. 706892 E. NONE 3. The following information relates to Pepper Company. Pepper's fiscal year ends September 30. Pepper did not have any temporary or permanent differences for 2018, 2019, or 2020. Pepper's taxable income for its first three years of operations are as follows: 2018 344,000 2019 (558,000) 2020 650,000 Pepper's tax rate is 34% for 2018 and 2019. The enacted tax rate for 2020 is 38% and all future years. Pepper was certain that it would recover the full tax benefit of the Net Operating Loss (NOL). What did Pepper report as income tax payable for 2020 after application of the NOL? A. 34960 B. 49400 C. 63840 D. 189720 E.NONE
