Excel Problem Set 3, Leases, Spring 2008

# Excel Problem Set 3, Leases, Spring 2008 - Excel Problem...

This preview shows pages 1–2. Sign up to view the full content.

Excel Problem Set 3, Leases. Accy 303, Fall 2007 Example of operating and capital leases Asset cost/present value \$18,737,653 Note: annual lease payments on the first day of each year. Term of lease in years: 12 Note: NPV equals the first lease payment, undiscounted, plus the present Annual payment: \$2,500,000 value of lease payments in years 2-12. Implied interest rate: 10.00% lease costs: Payment, Obligation, Interest Obligation, Depreciation Asset Interest exp Operating Year 1-Jan 1-Jan expense 31-Dec expense book value + Depreciation lease costs \$18,737,653 \$18,737,653 1 \$2,500,000 \$16,237,653 \$1,623,765 \$17,861,418 \$1,561,471 \$17,176,181 \$3,185,236 \$2,500,000 2 \$2,500,000 \$15,361,418 \$1,536,142 \$16,897,560 \$1,561,471 \$15,614,710 \$3,097,613 \$2,500,000 3 \$2,500,000 \$14,397,560 \$1,439,756 \$15,837,315 \$1,561,471 \$14,053,239 \$3,001,227 \$2,500,000 4 \$2,500,000 \$13,337,315 \$1,333,732 \$14,671,047 \$1,561,471 \$12,491,768 \$2,895,203 \$2,500,000 5 \$2,500,000 \$12,171,047 \$1,217,105 \$13,388,152 \$1,561,471 \$10,930,297 \$2,778,576 \$2,500,000 6 \$2,500,000 \$10,888,152 \$1,088,815 \$11,976,967 \$1,561,471 \$9,368,826 \$2,650,286 \$2,500,000 7 \$2,500,000 \$9,476,967 \$947,697 \$10,424,664 \$1,561,471 \$7,807,355 \$2,509,168 \$2,500,000 8 \$2,500,000 \$7,924,664 \$792,466 \$8,717,130 \$1,561,471 \$6,245,884 \$2,353,937 \$2,500,000 9 \$2,500,000 \$6,217,130 \$621,713 \$6,838,843 \$1,561,471 \$4,684,413 \$2,183,184 \$2,500,000 10 \$2,500,000 \$4,338,843 \$433,884 \$4,772,727 \$1,561,471 \$3,122,942 \$1,995,355 \$2,500,000 11 \$2,500,000 \$2,272,727 \$227,273 \$2,500,000 \$1,561,471 \$1,561,471 \$1,788,744 \$2,500,000 12 \$2,500,000 \$0 \$0 \$0 \$1,561,471 \$0 \$1,561,471 \$2,500,000 \$11,262,347 \$18,737,653 \$30,000,000 \$30,000,000 Leasee Lessor At inception Asset \$18,737,653 Lease asset \$18,737,653 Cash \$18,737,653 Lease liab \$18,737,653 Lease receivable \$18,737,653 Beginning of year 1 Asset \$18,737,653 Lease liability \$2,500,000 Cash \$2,500,000 Beginning of year 1 Cash \$2,500,000 End of year 1 Lease receivable \$2,500,000 Interest expense \$1,623,765 Interest payable \$1,623,765 End of year 1 Interest Receivable \$1,623,765 Depreciation exp \$1,561,471 Interest income \$1,623,765 Accumulated dep \$1,561,471 Beginning of year 2 Beginning of year 2 Cash \$2,500,000 Lease liability \$876,235 Interest Receivable \$1,623,765 Interest payable \$1,623,765 Lease receivable \$876,235 Cash \$2,500,000 Note: At lease inception, the liability immediately decreased from \$18,737,653 to \$16,237,653 with the first \$2,500,000 payment. During year 1 the lease liability increased by the \$1,623,765 interest expense, which was not paid. On January 1, year 2, the lessee paid an additional \$2,500,000. The net of the \$1,623,765 increase to lease liability and the \$2,500,000 decrease because of the annual lease payment, is a decrease to the lease liabiltiy of \$876,235. With a short-term lease, the lessee debits lease expense and credits cash for each lease payment.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 7

Excel Problem Set 3, Leases, Spring 2008 - Excel Problem...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online