Milestone 2 Management Brief Milestone 2: Management Brief Southern New Hampshire University Tia Williams 1
Milestone 2 Management Brief Capital Lease: Capital leases are contracts that allow the renter to have temporary use of a specific asset; capital leases have economic characteristics of an asset ownership for accounting purposes only. Peyton Approved lease payments are split into payments and interest. The payments are $20,000 for a term of six years with an interest rate of 5%. Peyton’s capital lease total obligation is $101,513.82, which is detailed in Peyton approved books. The remaining lease payments will be recorded as a liability and the equipment as an asset. Peyton Approved would need to deduct the interest as interest expense and depreciation of its equipment as depreciation expense. By reducing net income Peyton Approved could potentially have lower taxes with a capital lease rather than from a operational lease.
You've reached the end of your free preview.
Want to read all 4 pages?
- Fall '15