chapter21excel

chapter21excel - FACTS Lease a computer worth Lease term...

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FACTS Lease a computer worth 3,000 Lease term 3 yrs Annual payment 1,143 Estimated life of a computer 4 yrs Effective borrowing rate 7% PRESENT VALUE OF PAYMENTS $3,000 ANNUAL DEPRECIATION $750 CAPITAL LEASE OPENING YEAR ONE YEAR TWO YEAR THREE Equipment 3,000 Cap lease obligation 3,000 Cash 1,143 1,143 1,143 Interest expense 210 145 75 Capital lease obligation 933 998 1,068 Depreciation expense 750 750 750 Accumulated depreciation 750 750 750 OPERATING LEASE Rent expense NO OPENING ENTRY! 1,143 1,143 1,143 Cash 1,143 1,143 1,143 COMPARE EXPENSE OF THE TWO: CAPITAL LEASE OPERATING LEASE Interest expense 429 Rent expense 3,429 Depreciation expense 3,000 3,429 DIFFERENCE BETWEEN THE TWO OVERALL: NONE!!!!
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YEAR FOUR - - 750 750
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Payment 25,981.62 OPENING ENTRY: Property tax (2,000.00) Equipment 100,000 Lease portion 23,981.62 Capital lease obligation 100,000 Rate 10% * 1/1/05 ENTRY: Period 5 Lease liability 23,982 PV 100,000 Property tax expense 2,000 Life of asset 5 Cash 25,982 - * smaller of lessee borrowing rate or lessor implicit rate
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chapter21excel - FACTS Lease a computer worth Lease term...

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