Int. Actg cdn Chapter 21 Exercise Solutions

Int. Actg cdn Chapter 21 Exercise Solutions -...

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &+$37(5 /($6(6 &KDSWHU $66,*10(17&/$66,),&$7,217$%/( 5DWLRQDOHIRUOHDVLQJ 7RSLFV %ULHI ([HUFLVHV ([HUFLVHV 3UREOHPV /HVVHHVFODVVLILFDWLRQ RIOHDVHVDFFRXQWLQJ E\OHVVHHV 'LVFORVXUHRIOHDVHV /HVVRUVFODVVLILFDWLRQ RIOHDVHVDFFRXQWLQJ E\OHVVRUV 6DOHDQGOHDVHEDFN 5HDOHVWDWHOHDVHV :ULWLQJ $VVLJQPHQWV 7KLVPDWHULDOLVGHDOWZLWKLQ DQ$SSHQGL[WRWKHFKDSWHU 21-1 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK $66,*10(17&+$5$&7(5,67,&67$%/( ,WHP ( 'HVFULSWLRQ /HVVHHHQWULHVFDSLWDOOHDVHZLWK XQJXDUDQWHHGUHVLGXDOYDOXH /HVVHH(QWULHVRSHUDWLQJOHDVHFRPSDULVRQ /HVVHHFDOFXODWLRQVDQGHQWULHVFDSLWDOOHDVH ZLWKJXDUDQWHHGUHVLGXDOYDOXH /HVVHHHQWULHVFDSLWDOOHDVHZLWKH[HFXWRU\ FRVWVDQGXQJXDUDQWHHGUHVLGXDOYDOXHV /HVVHHHQWULHVFDSLWDOOHDVHZLWKH[HFXWRU\ FRVWVDQGXQJXDUDQWHHGUHVLGXDOOHDVHDQG ILVFDO\HDUGLIIHU /HVVRUHQWULHVGLUHFWILQDQFLQJOHDVHZLWK RSWLRQWRSXUFKDVHOHVVHHFDSLWDOL]DEOH DPRXQW 7\SHRIOHDVHDPRUWL]DWLRQVFKHGXOH /HVVRUHQWULHVVDOHVW\SHOHDVH &DSLWDOOHDVHSD\PHQW/HVVHHOHVVRUHQWULHV FDSLWDOVDOHVW\SHOHDVH 7\SHRIOHDVH/HVVHHHQWULHVZLWKEDUJDLQ SXUFKDVHRSWLRQ /HVVRUHQWULHVZLWKEDUJDLQSXUFKDVHRSWLRQ &DOFXODWLRQRIUHQWDOMRXUQDOHQWULHVIRUOHVVRU $PRUWL]DWLRQVFKHGXOHDQGMRXUQDOHQWULHVIRU OHVVHH $FFRXQWLQJIRUDQRSHUDWLQJOHDVH $FFRXQWLQJIRUDQRSHUDWLQJOHDVHDQG GLVFORVXUHOHVVHHDQGOHVVRU 2SHUDWLQJOHDVHIRUOHVVHHDQGOHVVRU /HVVRUHQWULHVGHWHUPLQHW\SHRIOHDVHFDSLWDO OHDVHSD\PHQWV 2SHUDWLQJOHDVHYHUVXVFDSLWDOOHDVH 6DOHDQGOHDVHEDFNOHVVHHDQGOHVVRUHQWULHV /HVVHHOHVVRUVDOHOHDVHEDFN /DQGOHDVHOHVVHHDQGOHVVRU 5HDOHVWDWHOHDVH &KDSWHU /HYHORI 7LPH 'LIILFXOW\ PLQXWHV 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 6LPSOH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 6LPSOH 6LPSOH ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( 3 3 3 ( ( 6LPSOH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH &DSLWDOOHDVHWROHVVHHDQGRSHUDWLQJOHDVHWR &RPSOH[ OHVVRUHQWULHVDQGILQDQFLDOVWDWHPHQWV 2SHUDWLQJOHDVHOHVVHHOHVVRUHQWULHV 6LPSOH /HVVHHOHVVRUHQWULHVEDODQFHVKHHWDQGFDVK 0RGHUDWH IORZSUHVHQWDWLRQVDOHVW\SHOHDVH 21-2 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU $66,*10(17&+$5$&7(5,67,&67$%/(&RQWLQXHG ,WHP 3 3 3 3 3 3 'HVFULSWLRQ %DODQFHVKHHWDQGLQFRPHVWDWHPHQW GLVFORVXUHOHVVHH %DODQFHVKHHWDQGLQFRPHVWDWHPHQW GLVFORVXUHOHVVRU /HVVHHHQWULHVDQGEDODQFHVKHHWDQGFDVK IORZSUHVHQWDWLRQFDSLWDODQGRSHUDWLQJOHDVH /HVVRUFDOFXODWLRQVDQGHQWULHVVDOHVW\SH OHDVHZLWKXQJXDUDQWHHGUHVLGXDOYDOXH /HVVHHFDOFXODWLRQVDQGHQWULHVFDSLWDOOHDVH ZLWKJXDUDQWHHGDQGXQJXDUDQWHHGUHVLGXDO YDOXHDQGEDUJDLQRSWLRQ /HVVRUFDOFXODWLRQVXQHDUQHGUHYHQXH UHFRJQL]HGXVLQJ VWUDLJKWOLQHPHWKRG %DVLFOHVVHHDFFRXQWLQJZLWKGLIILFXOW39 FDOFXODWLRQ /HVVRUFDOFXODWLRQVDQGHQWULHVVDOHVW\SH OHDVHZLWKJXDUDQWHHGDQGXQJXDUDQWHHG UHVLGXDOYDOXHZLWKGLVFORVXUHDPRUWL]DWLRQ FDOFXODWLRQVIRUOHVVHH /HVVHHOHVVRUDFFRXQWLQJIRUUHVLGXDOYDOXH &RQWUDVWLQJFDSLWDODQGRSHUDWLQJOHDVHFKRLFH /HDVHDFFRXQWLQJDQGUHSRUWLQJ RSHUDWLQJ OHDVHWROHVVHHDQGFDSLWDOOHDVHWROHVVRU 6DOHDQGOHDVHEDFNDUUDQJHPHQW 6DOHDQGOHDVHEDFNRIUHDOHVWDWH &DSLWDOL]DWLRQFULWHULD HWKLFDOFRQVLGHUDWLRQV /HDVHDFFRXQWLQJDQGUHSRUWLQJ FRPSDULVRQ RIGLIIHUHQWW\SHVRIDFFRXQWLQJE\OHVVHHDQG OHVVRU /HVVHHFDSLWDOL]DWLRQFULWHULD /HVVHHFDSLWDOL]DWLRQRIEDUJDLQSXUFKDVH RSWLRQ HYLGHQFHRIWUDQVIHURIRZQHUVKLS 6DOHOHDVHEDFN /HYHORI 7LPH 'LIILFXOW\ PLQXWHV 0RGHUDWH 0RGHUDWH 0RGHUDWH &RPSOH[ &RPSOH[ 0RGHUDWH 0RGHUDWH &RPSOH[ 3 3 3 3 3 3 3 : : : : &RPSOH[ 0RGHUDWH &RPSOH[ &RPSOH[ &RPSOH[ 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH 0RGHUDWH : 21-3 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK 62/87,21672%5,()(;(5&,6(6 %5,()(;(5&,6( &KDSWHU 7KH OHDVH GRHV QRW PHHW WKH WUDQVIHU RI RZQHUVK LS WHVW WKH EDUJDLQSXUFKDVHWHVW RUWKHHFRQRPLFOLIHWHVW>\HDUV\HDUV @+RZHYHULWGRHVSDVVWKHUHFRYHU\RILQYHVWPHQWWHVW7KH SUHVHQWYDOXHRIWKHPLQLPXPOHDVHSD\PHQWV; RUXVLQJWKHDOWHUQDWLYHVEH ORZ LVJUHDWHUWKDQRI WKH )09 RI WKH DVVHW ; 7KHUHIRUH :DUS6SHHGVKRXOGFODVVLI\WKHOHDVHDVDFDSLWDOOHDVH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH %5,()(;(5&,6( ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH (TXLSPHQW8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK 21-4 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU 8VLQJH[FHORUDILQDQFLDOFDOFXODWRUVROYHWKHSD\PHQWDPRXQW ([FHOIRUPXOD 307UDWHQSHUSYIYW\SH 8VLQJDILQDQFLDOFDOFXODWRU 39 5$7( 135 307 " )9 7\SH <LHOGV 8VLQJ7DEOH$3UHVHQW9DOXHRIDQDQQXLW\GXHSHULRGVDW RISD\PHQW %5,()(;(5&,6( ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH > ;;@ $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ ;; %5,()(;(5&,6( ,QWHUHVW3D\DEOH ,QWHUHVW([SHQVH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK ;; 21-5 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU 5HQW([SHQVH &DVK %5,()(;(5&,6( &DVK 8QHDUQHG5HQW5HYHQXH 8QHDUQHG5HQW5HYHQXH 5HQW5HYHQXH; %5,()(;(5&,6( /HDVH3D\PHQWV5HFHLYDEOH (TXLSPHQW3XUFKDVHGIRU/HDVH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV /HDVHSD\PHQWVUHFHLYDEOH > ; 39RIUHQWDOV; 8QHDUQHGLQWHUHVW &DVK /HDVH3D\PHQWV5HFHLYDEOH %5,()(;(5&,6( 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV > ;@ 21-6 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU /HDVH3D\PHQWV5HFHLYDEOH 6DOHV5HYHQXH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV &RVWRI*RRGV6ROG ,QYHQWRU\)LQLVKHG*RRGV &DVK /HDVH3D\PHQWV5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV > ;@ %5,()(;(5&,6( 0DFKLQHU\8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV 8VLQJWDEOHV 39RIUHQWDOV >39RIJXDU59 ; ; 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK 21-7 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU 0DFKLQHU\8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV 8VLQJWDEOHV 39RIUHQWDOV ; 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK %5,()(;(5&,6( /HDVH3D\PHQWV5HFHLYDEOH 0DFKLQHU\3XUFKDVHGIRU/HDVH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV >; @ &DVK /HDVH3D\PHQWV5HFHLYDEOH 21-8 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH &RVWRI*RRGV6ROG ,QYHQWRU\ &DVK /HDVH3D\PHQWV5HFHLYDEOH %5,()(;(5&,6( 3D\PHQWVDUHDVVXPHGWREHDWWKHEHJLQQLQJRIHDFK\HDU ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH /HDVH3D\PHQWV5HFHLYDEOH 6DOHV5HYHQXH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV >; ; @ ; /HDVH3D\PHQWV5HFHLYDEOH &RVWRI*RRGV6ROG 6DOHV5HYHQXH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QYHQWRU\ ; ; ; &DVK /HDVH3D\PHQWV5HFHLYDEOH 21-9 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU &DVK $FFXPXODWHG$PRUWL]DWLRQ 7UXFN 7UXFN 8QHDUQHG3URILWRQ6DOH/HDVHEDFN 7UXFN8QGHU&DSLWDO /HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV ; 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ; 8QHDUQHG3URILWRQ6DOH/HDVHEDFN $PRUWL]DWLRQ([SHQVH; ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH ,QWHUHVW([SHQVH; 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK 21-10 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU -DQXDU\ /DQG8QGHU&DSLWDO/HDVHV %XLOGLQJ8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH 'HFHPEHU ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH > ;@ $PRUWL]DWLRQ([SHQVH %XLOGLQJ $FFXPXODWHG$PRUWL]DWLRQ %XLOGLQJ 21-11 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK %5,()(;(5&,6( &KDSWHU -DQXDU\ %XLOGLQJ8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV /DQG5HQWDO([SHQVH &DVK >; @ 'HFHPEHU ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH > ;@ $PRUWL]DWLRQ([SHQVH %XLOGLQJ $FFXPXODWHG$PRUWL]DWLRQ %XLOGLQJ 21-12 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK 62/87,21672(;(5&,6(6 (;(5&,6( PLQXWHV &KDSWHU D 7KLVLVDFDSLWDOOHDVHWR%XUNHVLQFHWKHOHDVHWHUP\HDUV LVJUHDWHUWKDQRIWKHHFRQRPLFOLIH\HDUV RIWKHOHDVHG DVVHW7KHOHDVHWHUPLV RIWKHDVVHWVHFRQRPLF OLIH E &DOFXODWLRQRISUHVHQWYDOXHRIPLQLPXPOHDVHSD\PHQWV ; 3UHVHQWYDOXHRIDQDQQXLW\GXHRIIRUSHULRGVDW 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH F 0DFKLQH8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK 21-13 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ 0DFKLQH8QGHU&DSLWDO/HDVHV ,QWHUHVW ([SHQVH ,QWHUHVW3D\DEOH > ;@ 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV ,QWHUHVW3D\DEOH &DVK 21-14 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU D 7KLVLVDQRSHUDWLQJOHDVHWR%XUNHVLQFHWKHO HDVHWHUP \HDUV LVOHVVWKDQRIWKHHFRQRPLFOLIH\HDUV RIWKH OHDVHGDVVHW7KHOHDVHWHUPLV RIWKHDVVHWV HFRQRPLFOLIH7KHUHLVQREDUJDLQSXUFKDVHRSWLRQDQGWKH SUHVHQW YDOXH RI PLQLPXP OHDVH SD\PHQWV RI UHSUHVHQW RIWKHIDLUYDOXHDW-DQXDU\RIIDOOLQJ VKRUWRIWKHFULWHULDRIWRWUHDWWKHOHDVHDVDFDSLWDOOHDVH E -DQXDU\ 5HQW([SHQVH &DVK -DQXDU\ 5HQW([SHQVH &DVK 21-15 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG F DQGG &KDSWHU %DODQFHVKHHW 3URSHUW\3ODQW(TXLSPHQW 0DFKLQHXQGHUFDSLWDOOHDVH /HVV$FFXPXODWHGDPRUWL]DWLRQ &XUUHQW/LDELOLWLHV ,QWHUHVW3D\DEOH &XUUHQWSRUWLRQRIOHDVHREOLJDWLRQ /RQJWHUPOLDELOLWLHV 2EOLJDWLRQXQGHUFDSLWDOOHDVH /HVV&XUUHQWSRUWLRQ 6WDWHPHQWRI,QFRPH $PRUWL]DWLRQH[SHQVH ,QWHUHVWH[SHQVH 5HQWH[SHQVH H ( 2SHUDWLQJ /HDVH ( &DSLWDO /HDVH 7KHDPRXQWVDSSHDULQJRQWKHILQDQFLDOVWDWHPHQW LQSDUWF DQGG DERYHOHDGWRWKHFRQFOXVLRQWKDWQHWLQFRPHZRXOGEH ORZHUDQGWKHUHIRUHHDUQLQJVSHUVKDUHZRXOGEHORZHULIWKH OHDVHZHUHWUHDWHGDVDFDSLWDOOHDVH$VZHOOXVLQJEDODQFH VKHHWLQIRUPDWLRQZHFDQVHHWKDWOLTXLGLW\UDWLRVZRXOG EH DGYHUVHO\DIIHFWHGVLQFHWKHHTXLYDOHQWRIRQHOHDVHSD\PHQW DSSHDUVDVDFXUUHQWOLDELOLW\ZKHQWKHOHDVHLVWUHDWHGDVD FDSLWDOOHDVH'HEWWRWRWDODVVHWUDWLRVZLOOEHDIIHFWHGE\WKH SUHVHQFHRIWKHORQJWHUPGHEWREOLJDWLRQDQGWKHDGGLWLRQDO SURSHUW\SODQWDQGHTXLSPHQW 21-16 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(PLQXWHV &KDSWHU D 7R'HODQH\WKHOHVVHHWKLVOHDVHLVDFDSLWDOOHDVHEHFDXVH WKHWHUPVVDWLVI\WKHIROORZLQJFULWHULD 7KHOHDVHWHUPLVJUHDWHUWKDQRIWKHHFRQRPLFOLIHRI WKHOHDVHGDVVHWWKDWLVWKHOHDVHWHUPLV RI WKHHFRQRPLFOLIH 7KH SUHVHQW YDOXH RI WKH PLQLPXP OHDVH SD\PHQWV LV JUHDWHUWKDQRIWKHIDLUYDOXHRIWKHOHDVHGDVVHWWKDW LVWKHSUHVHQWYDOXHRILVRIWKHIDLUYDOXHRI WKHOHDVHGDVVHW E 7KH PLQLPXP OHDVH SD\PHQWV LQ WKH FDVH RI D JXDUDQWHHG UHVLGXDOYDOXHE\WKHOHVVHHLQFOXGHWKHJXDUDQWHHGUHVLGXDO YDOXH7KHSUHVHQWYDOXHWKHUHIRUHLV 39RIPRQWKO\SD\PHQWRIIRUPRQWKV 39RIUHVLGXDOYDOXH RI 3UHVHQWYDOXHRIPLQLPXPOHDVHSD\PHQWV 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH F 3URSHUW\8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 21-17 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU G $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ&DSLWDO /HDVHV > PRQWKV @ H 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV ,QWHUHVW([SHQVH; &DVK 21-18 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU &DSLWDOL]HGDPRXQWRIWKHOHDVH <HDUO\SD\PHQW ([HFXWRU\FRVWV 0LQLPXPDQQXDOOHDVHSD\PHQW 3UHVHQWYDOXHRIPLQLPXPOHDVHSD\PHQWV ; 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH %XLOGLQJ8QGHU&DSLWDO /HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV 3URSHUW\7D[([SHQVH 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV ,QWHUHVW([SHQVH 6HH6FKHGXOH ,QWHUHVW3D\DEOH 21-19 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU 3URSHUW\7D[([SHQVH ,QWHUHVW3D\DEOH 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV 6FKHGXOH ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH /$+(<3$3(5&253 /HDVH$PRUWL]DWLRQ6FKHGXOH /HVVHH ,QWHUHVW RQ8QSDLG 2EOLJDWLRQ 5HGXFWLRQ RI/HDVH 2EOLJDWLRQ %DODQFH RI/HDVH 2EOLJDWLRQ 'DWH $QQXDO3PW ([FO ([HF&RVWV 21-20 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU (;(5&,6( PLQXWHV %XLOGLQJ8QGHU&DSLWDO /HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV 3URSHUW\7D[([SHQVH 3UHSDLG3URSHUW\7D[HV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK ; ; $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV ; ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH [ 3URSHUW\7D[([SHQVH 3UHSDLG3URSHUW\7D[HV 1RWH7KLVHQWU\FRXOGDOVREHGRQHDW0D\ DVD\HDUHQGDGMXVWLQJHQWU\ 3URSHUW\7D[([SHQVH 3UHSDLG3URSHUW\7D[HV ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK 21-21 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH ; 21-22 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK D &DOFXODWLRQRIDQQXDOSD\PHQWV &RVWIDLUPDUNHWYDOXH RIOHDVHGDVVHW WROHVVRU /HVV3UHVHQWYDOXHRIUHVLGXDOYDOXH ; 3UHVHQWYDOXHRIDW IRUSHULRGV $PRXQWWREHUHFRYHUHGWKURXJKOHDVHSD\PHQWV 7ZRSHULRGLFOHDVHSD\PHQWV (;(5&,6( PLQXWHV &KDSWHU 3UHVHQWYDOXHRIDQRUGLQDU\DQQXLW\RIIRUSHULRGVDW 8VLQJDILQDQFLDOFDOFXODWRU 39 , 1 307 " <LHOGV )9 7\SH &DOFXODWLRQRIOHDVHSD\PHQWVUHFHLYDEOH $QQXDOSD\PHQWV; 5HVLGXDOYDOXH /HDVHSD\PHQWVUHFHLYDEOH &DOFXODWLRQRIXQHDUQHGLQWHUHVWUHYHQXH *URVVLQYHVWPHQWE\OHVVHH $VVHWFRVWIDLUYDOXH 8QHDUQHGLQWHUHVWUHYHQXH ([FHOIRUPXOD 307UDWHQSHUSYIYW\SH 21-23 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU &$67/(/($6,1*&25325$7,21/HVVRU /HDVH$PRUWL]DWLRQ6FKHGXOH $QQXDO3PW ,QWHUHVW ([FO([HF RQ1HW &RVWV ,QYHVWPHQW 1HW ,QYHVWPHQW 5HFRYHU\ 1HW ,QYHVWPHQW 'DWH 'LIIHUHQFHRIGXHWRURXQGLQJ E /HDVH3D\PHQWV5HFHLYDEOH (TXLSPHQW3XUFKDVHG IRU/HDVH 8QHDUQHG,QWHUHVW 5HYHQXH/HDVHV &DVK ([HFXWRU\&RVWV 3D\DEOH([SHQVH /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH /HDVHV 21-24 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU &DVK ([HFXWRU\&RVWV 3D\DEOH([SHQVH /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH /HDVHV F G 8SRQVLJQLQJWKHOHDVH-DQ:DL&RUSRUDWLRQVKRXOGFDSLWDOL]H WKH SUHVHQW YDOXH RI WKH PLQLPXP OHDVH SD\PHQWV LQ WKH DPRXQWRIH[FOXGLQJWKHIXWXUHSD\PHQWDPRXQWRI WKHRSWLRQWRSXUFKDVHWKHHTXLSPHQWRI7KLVZLOO \LHOGDQDPRXQWRIDVFDOFXODWHGLQSDUWD 7KH OHVVHHH[FOXGHVWKLVODVWSD\PHQWDVLWLVQRWDJXDUDQWHHG SD\PHQWE\WKHOHVVHH-DQ:DLWRWKHOHVVRU&DVWOH/HDVLQJ &RUUHVSRQGLQJO\WKH2EOLJDWLRQ8QGHU&DSLWDO/HDVHVKRXOG EHUHFRUGHGDW 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH &DVK /HDVH3D\PHQWV 5HFHLYDEOH 21-25 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU D %HFDXVHWKHOHDVHWHUPLVORQJHUWKDQRIWKHHFRQRPLF OLIHRIWKHDVVHWDQGWKHSUHVHQWYDOXHRIWKHPLQLPXPOHDVH SD\PHQWVLVPRUHWKDQRIWKHIDLUYDOXHRIWKHDVVHWLWLVD FDSLWDOOHDVHWRWKHOHVVHH$VVXPLQJFROOHFWLELOLW \RIWKHUHQWV LV UHDVRQDEO\ DVVXUHG DQG QR LPSRU WDQW XQFHUWDLQWLHV VXUURXQG WKH DPRXQW RI XQUHLPEXUVDEOH FRVWV \HW WR EH LQFXUUHGE\WKHOHVVRUWKHOHDVHLVDGLUHFWILQDQFLQJOHDVHWR WKHOHVVRU 7KHOHVVHHVKRXOGDGRSWWKHFDSLWDOOHDVHPHWKRGDQGUH FRUG WKHOHDVHGDVVHWDQGOHDVHREOLJDWLRQDWWKHSUHVHQWYDOXHRI WKHPLQLPXPOHDVHSD\PHQWVXVLQJWKHOHVVHHVLQFUHPHQWDO ERUURZLQJUDWHRUWKHLQWHUHVWUDWHLPSOLFLWLQWKHOHDVHLILWLV ORZHUWKDQWKHLQFUHPHQWDOUDWHDQGLVNQRZQWRWKHOHVVHH 7KH OHVVHHV DPRUWL]DWLRQ GHSHQGV RQ ZKHWKHU RZQHUVKLS WUDQVIHUVWRWKHOHVVHHRULIWKHUHLVDEDUJDLQSXUFKDVHR SWLRQ ,IRQHRIWKHVHFRQGLWLRQVLVIXOILOOHGDPRUWL]DWLRQZRXOGEH RYHUWKHHFRQRPLFOLIHRIWKHDVVHW2WKHUZLVHLWZRXOGEH DPRUWL]HGRYHUWKHOHDVHWHUP%HFDXVHERWKWKHHFRQRPLFOLIH RI WKHDVVHW DQGWKH OHDVH WHUP DUH WKUHH\HDUV WKHOHDVHG DVVHWVKRXOGEHDPRUWL]HGRYHUWKLVSHULRG 7KHOHVVRUVKRXOGDGRSWWKHGLUHFWILQDQFLQJOHDVHPHWKRGDQG UHSODFH WKH DVVHW FRVW RI ZLWK /HDVH 3D\PHQWV 5HFHLYDEOH RI DQG 8QHDUQHG ,QWHUHVW 5HYHQXH RI 6HHVFKHGXOHEHORZ ,QWHUHVWZRXOGEHUHFRJQL]HG DQQXDOO\ DW D FRQVWDQW UDWH UHODWLYH WR WKH XQU HFRYHUHG QHW LQYHVWPHQW &RVWIDLUPDUNHWYDOXHRIOHDVHGDVVHW $PRXQWWREHUHFRYHUHGE\OHVVRUWKURXJKOHDVH SD\PHQWV 7KUHHDQQXDOOHDVHSD\PHQWV /HDVH3D\PHQWV5HFHLYDEOH ; 3UHVHQWYDOXHRIDQRUGLQDU\DQQXLW\RIIRUSHULRGVDW 21-26 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( &RQWLQXHG &KDSWHU 8VLQJDILQDQFLDOFDOFXODWRU 39 , 1 307 " <LHOGV )9 7\SH E 6FKHGXOHRI,QWHUHVWDQG$PRUWL]DWLRQ 5HQW 5HFHLSW 3D\PHQW ,QWHUHVW 5HYHQXH ([SHQVH $PRUWL]DWLRQ RI3ULQFLSDO ,QYHVWPHQW 2EOLJDWLRQ ([FHOIRUPXOD 307UDWHQSHUSYIYW\SH ; URXQGLQJGLIIHUHQFH 21-27 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU (;(5&,6( PLQXWHV D &DOFXODWLRQRIJURVVLQYHVWPHQW ; &DOFXODWLRQRIXQHDUQHGLQWHUHVWUHYHQXH *URVVLQYHVWPHQW /HVV)DLUPDUNHWYDOXHRIPDFKLQH 8QHDUQHGLQWHUHVWUHYHQXH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH ;39IDFWRURIDQQXLW\GXHDWIRUSHULRGV ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 1HWLQYHVWPHQWLQOHDVH /HDVHSD\PHQWVUHFHLYDEOH /HVV8QHDUQHGLQWHUHVWUHYHQXH OHDVHV 21-28 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG E &KDSWHU /HDVH3D\PHQWV5HFHLYDEOH &RVWRI*RRGV6ROG 6DOHV5HYHQXH ,QYHQWRU\ 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV &DVK /HDVH3D\PHQWV5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH > ;@ 21-29 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU D 7KLVLVDFDSLWDOOHDVHWR)O\QQVLQFHWKHOHDVHWHUPLV RIWKHDVVHWVHFRQRPLFOLIH,QDGGLWLRQWKHSUHVHQWYDOXH RIWKHPLQLPXPOHDVHSD\PHQWVLVPRUHWKDQRIWKHIDLU YDOXHRIWKHDVVHW E &DOFXODWLRQRIDQQXDOUHQWDOSD\PHQW ; 7KLVLVDVDOHVW\SHOHDVHWR*DUFLQVLQFHWKHOHDVHLVDFDS LWDO OHDVHWR)O\QQWKHOHVVHHDQGEHFDXVHWKHFROOHFWLELOLW\RIWKH OHDVH SD\PHQWV LV UHDVRQDEO\ SUHGLFWDEOH WKHUH DUH QR LPSRUWDQW XQFHUWDLQWLHV VXUURXQGLQJ WKH FRVWV \HW WR EH LQFXUUHG E\ WKH OHVVRU DQG WKH IDLU YDOXH RI WKH HTXLSPHQW H[FHHGVWKHOHVVRUVFRVW 3UHVHQWYDOXHRIDWIRUSHULRGV 3UHVHQWYDOXHRIDQDQQXLW\GXHDWIRUSHULRGV 8VLQJDILQDQFLDOFDOFXODWRU 39 , 1 307 " )9 7\SH ([FHOIRUPXOD 307UDWHQSHUSYIYW\SH <LHOGV 21-30 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG F &KDSWHU 3UHVHQWYDOXHRIDQDQQXLW\GXHDWIRUSHULRGV ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK (TXLSPHQW8QGHU&DSLWDO /HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV ; $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ \HDUV ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH ; 21-31 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG G &KDSWHU /HDVH3D\PHQWV5HFHLYDEOH &RVWRI*RRGV6ROG 6DOHV5HYHQXH ,QYHQWRU\ 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ; 6LQFHWKHUHVLGXDOYDOXHLVQRWJXDUDQWHHGWKHSUHVHQWYDOXHRIWKH UHVLGXDOYDOXHRILVZLWKKHOGIURPERWKVDOHVDQGFRVWRI JRRGVVROG 6DOHV5HYHQXH /HVVSUHVHQWYDOXHRIUHVLGXDOYDOXH &RVWRI*RRGV6ROG /HVVSUHVHQWYDOXHRIUHVLGXDOYDOXH ; 3UHVHQWYDOXHRIDWIRUSHULRGV &DVK /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV > ;@ 21-32 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU (;(5&,6( PLQXWHV D 7KHOHDVHDJUHHPHQWKDVDEDUJDLQSXUFKDVHRSWLRQD QGWKXV PHHWVWKHFULWHULDWREHFODVVLILHGDVDFDSLWDOOHDVHIURPWKH YLHZSRLQWRIWKHOHVVHH7KHSUHVHQWYDOXHRIWKHPLQLPXP OHDVHSD\PHQWVH[FHHGVRIWKHIDLUYDOXHRIWKHDVVHWV E 7KH OHDVH DJUHHPHQW KDV D EDUJDLQ SXUFKDVH RSWLRQ 7KH FROOHFWLELOLW\RIWKHOHDVHSD\PHQWVLVUHDVRQDEO\SUHGLFWDEOH DQG WKHUH DUH QR LPSRUWDQW XQFHUWDLQWLHV VXUURXQGLQJ WKH FRVWV\HWWREHLQFXUUHGE\WKHOHVVRU'XHWRWKHIDFWWKDWWKH OHDVHLVDFDSLWDOOHDVHWRWKHOHVVHHDQGWKHLQLWLDODPRXQWRI QHWLQYHVWPHQWZKLFKLQWKLVFDVHHTXDOVWKHSUHVHQWYDOXHRI WKHPLQLPXPOHDVHSD\PHQWV H[FHHGVWKHOHVVRUV FRVW WKHOHDVHLVDVDOHVW\SHOHDVHWRWKHOHVVRU F 1HWLQYHVWPHQWFDOFXODWLRQ $QQXDOUHQWDOSD\PHQW ; 39 RIDQQXLW\GXHRIIRUQ L 39RISHULRGLFUHQWDOSD\PHQWV ; %DUJDLQSXUFKDVHRSWLRQ 39RIIRUQ L 39RIEDUJDLQSXUFKDVHRSWLRQ 39RISHULRGLFUHQWDOSD\PHQWV 39RIEDUJDLQSXUFKDVHRSWLRQ 1HWLQYHVWPHQWDWLQFHSWLRQRIOHDVH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 21-33 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU 'DWH G $QQXDO /HDVH 3D\PHQW 3OXV%32 ,EUDKLP&RUSRUDWLRQ/HVVHH /HDVH$PRUWL]DWLRQ6FKHGXOH ,QWHUHVW RQ8QSDLG 2EOLJDWLRQ 5HGXFWLRQ RI/HDVH 2EOLJDWLRQ %DODQFH /HDVH 2EOLJDWLRQ 5RXQGLQJHUURULVFHQWV (TXLSPHQW8QGHU &DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH ; $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV ; (;(5&,6(&RQWLQXHG 21-34 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU ,QWHUHVW3D\DEOH ,QWHUHVW([SHQVH 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH ; $PRUWL]DWLRQ([SHQVH $FFXPXODWHG$PRUWL]DWLRQ &DSLWDO/HDVHV \HDUV 1RWHWRLQVWUXFWRU %HFDXVHDEDUJDLQSXUFKDVHRSWLRQZDV LQYROYHGWKHOHDVHGDVVHWLVDPRUWL]HGRYHULWVHFRQRPLFOLIH UDWKHUWKDQRYHUWKHOHDVHWHUP 21-35 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU 1RWH 7KHOHDVHDJUHHPHQWKDVDEDUJDLQSXUFKDVHRSWLRQ7KH FROOHFWLELOLW\RIWKHOHDVHSD\PHQWVLVUH DVRQDEO\SUHGLFWDEOHDQG WKHUHDUHQRLPSRUWDQWXQFHUWDLQWLHVVXUURXQGLQJWKHFRVWV\HWWR EH LQFXUUHG E\ WKH OHVVRU 7KH OHDVH DOVR TXDOLILHV DV D FDSLWDO OHDVHIURPWKHYLHZSRLQWRIWKHOHVVHH 'XHWRWKHIDFWWKDWWKHLQLWLDODPRXQWRIQHWLQYHVWPHQW ZKLFKLQ WKLVFDVHHTXDOVWKHSUHVHQWYDOXHRIWKHPLQLPXPOHDVHSD\PHQWV H[FHHGVWKHOHVVRUVFRVW WKHOHDVHLVDVDOHV W\SHOHDVH D *URVV LQYHVWPHQW 0LQLPXP OHDVH SD\PHQWV DQ\ XQJXDUDQWHHGUHVLGXDOYDOXH 7KHPLQLPXPOHDVHSD\PHQWVDVVRFLDWHGZLWKWKLVOHDVHDUH WKHSHULRGLFDQQXDOUHQWVSOXVWKHEDUJDLQSXUFKDVHRSWLRQ 7KHUHLVQRUHVLGXDOYDOXHUHOHYDQWWRWKHOHVVRUVDFFRXQWLQJ LQWKLVOHDVH &DOFXODWLRQ ; *URVVLQYHVWPHQWDWLQFHSWLRQ E 7KH QHW LQYHVWPHQW HTXDOV WKH SUHVHQW YDOXH RI WKH FRPSRQHQWVRIWKHJURVVLQYHVWPHQWFDOFXODWLRQ 1HWLQYHVWPHQWFDOFXODWLRQ $QQXDOUHQWDOSD\PHQW ; 39RIDQQXLW\GXHRIIRUQ L 39RISHULRGLFUHQWDOSD\PHQWV ; %DUJDLQSXUFKDVHRSWLRQ 39RIIRUQ L 39RIEDUJDLQSXUFKDVHRSWLRQ 39RISHULRGLFUHQWDOSD\PHQWV 39RIEDUJDLQSXUFKDVHRSWLRQ 1HWLQYHVWPHQWDWLQFHS WLRQ 21-36 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH F +HUEHUW/HDVLQJ&RUSRUDWLRQ/HVVRU /HDVH$PRUWL]DWLRQ6FKHGXOH ,QWHUHVW RQ1HW ,QYHVWPHQW 1HW ,QYHVWPHQW 5HFRYHU\ %DODQFH 1HW ,QYHVWPHQW ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 'DWH $QQXDO /HDVH 3D\PHQW 3OXV%32 5RXQGLQJHUURULVFHQWV G /HDVH3D\PHQWV 5HFHLYDEOH &RVWRI*RRGV6ROG 6DOHV5HYHQXH 8QHDUQHG,QWHUHVW 5HYHQXH/HDVHV ,QYHQWRU\ 21-37 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU &DVK /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH /HDVHV ; &DVK /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV ; &DVK /HDVH3D\PHQWV 5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV ; 21-38 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU D )DLUPDUNHWYDOXHRIOHDVHGDVVHWWROHVVRU /HVV3UHVHQWYDOXHRIXQJXDUDQWHHG UHVLGXDOYDOXH; SUHVHQWYDOXHRIDWIRUSHULRGV $PRXQWWREHUHFRYHUHGWKURXJKOHDVHSD\PHQWV 6L[SHULRGLFOHDVHSD\PHQWV 3UHVHQWYDOXHRIDQQXLW\GXHRIIRUSHULRGVDW 5RXQGHGWRWKHQHDUHVWGROODU 8VLQJDILQDQFLDOFDOFXODWRU 39 , 1 307 " )9 7\SH ([FHOIRUPXOD 307UDWHQSHUSYIYW\SH <LHOGV 21-39 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG E &KDSWHU 'DWH $QQXDO /HDVH 3D\PHQW 3OXV859 -DPLO/HDVLQJ&RUSRUDWLRQ/HVVRU /HDVH$PRUWL]DWLRQ6FKHGXOH ,QWHUHVW RQ1HW ,QYHVWPHQW 1HW ,QYHVWPHQW 5HFRYHU\ %DODQFH RI1HW ,QYHVWPHQW URXQGLQJRI F /HDVH3D\PHQWV5HFHLYDEOH (TXLSPHQW3XUFKDVHGIRU/HDVH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV &DVK /HDVH3D\PHQWV5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV &DVK /HDVH3D\PHQWV5HFHLYDEOH 8QHDUQHG,QWHUHVW5HYHQXH /HDVHV ,QWHUHVW5HYHQXH/HDVHV 21-40 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6( PLQXWHV &KDSWHU 8VLQJDILQDQFLDOFDOFXODWRU 39 " , 1 307 )9 7\SH D ([FHOIRUPXOD 39UDWHQSHUSPW IYW\SH 1RWH 7KLVOHDVHLVDFDSLWDOOHDVHWRWKHOHVVHHEHFDXVHWKHOHDVH WHUPILYH\HDUV H[FHHGVRIWKHUHPDLQLQJHFRQRPLFOLIHRIWKH DVVHWVL[\HDUV $OVR WKHSUHVHQWYDOXHRIWKHPLQLPXPOHDVH SD\PHQWVH[FHHGVRIWKHIDLUYDOXHRIWKHDVVHW $QQXDOUHQWDOSD\PHQW ; 39RIDQDQQXLW\GXHRIIRUQ L 39RIPLQLPXPOHDVHSD\PHQWV <LHOGV /H%ODQF/LPLWHG/HVVHH /HDVH$PRUWL]DWLRQ6FKHGXOH $QQXDO /HDVH 3D\PHQW ,QWHUHVW 1 RQ8QSDLG 2EOLJDWLRQ 5HGXFWLRQ RI/HDVH 2EOLJDWLRQ %DODQFH RI/HDVH 2EOLJDWLRQ 'DWH 5RXQGLQJHUURULVFHQWV 7KHLPSOLFLWUDWHLVNQRZQDQGLVORZHUWKDQWKHOHVVHHV LQFUHPHQWDOERUURZLQJUDWHRI 21-41 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG (b) 1/1/05 &KDSWHU 2EOLJDWLRQV8QGHU&DSLWDO /HDVHV &DVK 'XULQJ ,QVXUDQFH([SHQVH &DVK 3URSHUW\7D[([SHQVH &DVK Equipment Under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a) Sale-leaseback arrangements are treated as though two transactions were a single financing transaction if the lease qualifies as a capital lease. Any gain or loss on the sale is deferred and amortized over the lease term (if possession reverts to the lessor) or the economic life (if ownership transfers to the lessee). In this case, the lease qualifies as a capital lease because the lease term (10 years) is 83% of the remaining economic life of the leased property (12 years). Therefore, at 12/31/05, all of the gain of $120,000 ($520,000 $400,000) would be deferred and amortized over 10 years. Since the sale took place on 12/31/05, there is no amortization for 2005. (b) A sale-leaseback is usually treated as a single financing transaction in which any profit on the sale is deferred and amortized by the seller. The lease does not meet any of the criteria of a capital lease for the property sold. In this case, the sale and the leaseback are accounted for as separate transactions. Therefore, the full gain ($480,000 $420,000, or $60,000) is recognized. (c) The profit on the sale of $121,000 should be deferred and amortized over the lease term. The lease qualifies as a capital lease. Since the leased asset is being amortized using the sum-of-the-years' amortization method, the deferred gain should also be reported in the same manner. Therefore, in the first year, $22,000 (10/55* X $121,000) of the gain would be recognized. * (1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 + 10) (d) In this case, Sondgeroth Corp. would report a loss of $87,300 ($300,000 $212,700) for the difference between the book value and lower fair value. The profession requires that when the fair value of the asset is less than the book value (carrying amount), a loss must be recognized immediately. In addition, rent expense of $72,000 ($6,000 per month X 12 months) should be reported. 21-56 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU (;(5&,6( PLQXWHV D 6HSWHPEHU 3UHSDLG/DQG5HQWDO &DVK 'HFHPEHU /DQG5HQW([SHQVH 3UHSDLG/DQG5HQWDO ; E 7KHUHQWDORIODQGFDQRQO\EHDFFRXQWHGIRUDVD FDSLWDOOHDVH E\WKHOHVVHHLIWKHUHQWDORIWKHSURSHUW\FRQWDLQVDEDUJDLQ SXUFKDVH RSWLRQ RU LI WKH OHDVH WUDQVIHUV RZQHUVKLS RI WKH SURSHUW\WRWKHOHVVHH6LQFHWKLVLVQRWWKHFDVHKHUHWKH OHDVHRIWKHODQGKDGWREHWUHDWHGDVDQRSHUDWLQJOHDVH,Q WKHFDVHRIHTXLSPHQWWKHSRVVLELOLW\RIDFFRXQWLQJIRUWKH OHDVHDVDFDSLWDOOHDVHLVPRUHOLNHO\GHSHQGLQJRQWKHWHUPV RIWKHOHDVHLQUHODWLRQWRWKHFDSLWDOL ]DWLRQFULWHULD F 6HSWHPEHU &DVK 8QHDUQHG/DQG5HQWDO5HYHQXH 'HFHPEHU 8QHDUQHG/DQG5HQWDO5HYHQXH /DQG5HQWDO5HYHQXH ; 21-57 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK &KDSWHU (;(5&,6( PLQXWHV D 0DUFK /DQG8QGHU&DSLWDO/HDVHV %XLOGLQJ8QGHU&DSLWDO/HDVHV 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV ; 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK ([FHOIRUPXOD 39UDWHQSHUSPWIYW\SH 8VLQJDILQDQFLDOFDOFXODWRU 39 " <LHOGV , 1 307 )9 7\SH E 'HFHPEHU ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH > ;; @ $PRUWL]DWLRQ([SHQVH %XLOGLQJ $FFXPXODWHG$PRUWL]DWLRQ %XLOGLQJ \HDU; 0DUFK ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH 2EOLJDWLRQV8QGHU&DSLWDO/HDVHV &DVK > ;;@ 21-58 .LHVRHWDO,QWHUPHGLDWH$FFRXQWLQJ &DQDGLDQ(GLWLRQ WK (;(5&,6(&RQWLQXHG &KDSWHU 'HFHPEHU ,QWHUHVW([SHQVH ,QWHUHVW3D\DEOH > ;; @ $PRUWL]DWLRQ([SHQVH %XLOGLQJ $FFXPXODWHG$PRUWL]DWLRQ %XLOGLQJ \HDU 21-59 ...
View Full Document

Ask a homework question - tutors are online