Hoang DuongE9-30,E10-26,P10-57 - E9-30 1 Jan. 1 lease

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Unformatted text preview: E9-30 1 Jan. 1 lease property....................................................... 9,413 Lease liability........................................... 9,413 To record a copy machine acquired under a 5 years noncancelable lease. Jan.31 Lease liability....................................................... 122 Interest Expense................................................... 78 Cash.......................................................... 200 To record annual lease payment under capital lease 2 Jan.1 there is no entry required because, this is the operating lease. The payment will be made at the end of each month Jan.31 Rent Expense..................................................200 Cash .................................................................. 200 To record monthly rent of office building E10-26 1\ interest of 8% compounded annually, repayment in 4 annual payments PV= F x factor F = PV\ factor = 250,000\3.3121 = 75,481 2\ interest of 7% compounded annually, repayment in 8 annual payments PV= F x factor F = PV\ factor = 250,000\5.9713 = 41,867 P10-57 1\ Debt Ratio: Debt ratio = Total Liabilities\ Total Assets = Total Liabilities\ (Total Liabilities + Total stockholders’ Equity) = 490,000\ (490,000 + 360,000) = 0.57 2\ Debt to equity ratio Debt to equity ratio = Total liabilities \ Total stockholders’ Equity = 490,000\360,000 = 1.36 3\ Times interest earned Times interest earned = Income before interest and taxes \ interest expense = (Earnings before income taxes + interest expense)\ Interest expense = (28,000 + 50,000)\ 50,000 =1.56 The Time Interest Earned is the most essential because this ratio measures how much a cushion has in making its interest payments. In this case, even The Time Interest Earned ratio is not low (1.56), but it shows that the company just made enough profit to afford its interest expense. Base on this ratio, we can conclude that it would be possible that Walker company couldn’t pay the interest expense in the future. ...
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Hoang DuongE9-30,E10-26,P10-57 - E9-30 1 Jan. 1 lease

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