Management Briefing II.docx - Management Brief Memo Upon acquiring six ovens Peyton Approved will be paying $20,000 a year for a 6-year term lease with

Management Briefing II.docx - Management Brief Memo Upon...

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Management Brief Memo Upon acquiring six ovens Peyton Approved will be paying $20,000 a year for a 6-year term lease, with an implicit interest rate of 5%. After the 6 years Peyton Approved will have paid a capital lease obligation of $101,513.82. To record this Peyton Approved will book the interest from financing in interest expense and depreciation under depreciation expense over the economic life of the equipment (see calculations in workbook). The advantages of the capital lease are that the depreciation on the asset and interest expense both reduce taxable income, which are both beneficial for the company. Peyton Approved is currently employing 60 and actuaries estimate that the company has a pension liability of $107,041.70 and an estimated cost of retired employees’ health insurance
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