07F IM WP F-6 Equip Lease p.1 - Prn

07F IM WP F-6 Equip Lease p.1 - Prn - The equipment has a...

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Apple Blossom Cologne Company F-6 Equipment Lease 1-26-04 12-31-03 JWP 1 of 2 ============================================================================================== ============================================================================================== Lease Obligation July 1, 2003 u 74800 E Less: payments in 2003 -0- Lease balance December 31, 2003 74800 Interest Accrual Related to Lease Obligation 74,800 X .11 X .5 = 4114 Depreciation on Capitalized Asset: 74,800 X .10 X .5 = 3740 E Examined copy of lease. u Traced to minutes of Board of Directors. NOTE: Having examined the lease agreement, I determined that the client should have capitalized the leased asset. Payments of $12,701 will be made in 10 equal annual installments beginning July 1, 2004.
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Unformatted text preview: The equipment has a fair market value of $74,800, equal to the present value of the lease payments ($12,701 X 5.88923* = $74,800). Propose (AJE #14) to capitalize lease in accordance with generally accepted accounting principles and depreciate equipment over the life of the lease (10 years): Machinery and equipment 230 74,800 Lease obligation--LT 450 74,800 Depreciation expense 822 3,740 Accumulated depn-M&E 231 3,740 * Present value of an annuity: 10 yrs., 11%. Propose (AJE #15) to accrue interest on lease obligation for period July 1 - December 31, 2003: Interest expense 901 4114 Accrued int. payable 305 4114...
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This note was uploaded on 11/01/2011 for the course ACCT 2301 taught by Professor Lewis during the Spring '09 term at Husson.

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