Handout 11 - Students

# Lease contract permits the lessee to purchase the

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Unformatted text preview: 3. Lease contract permits the lessee to purchase the asset at a price that is lower than the fair market value 4. The present value of the lease payments is 90% or more of the fair market value of the asset when the lease is signed Operating lease – a lease which does not meet any of the four criteria Present Value Concepts - Present value of a single amount – the worth to you today of receiving that amount sometime in the future o Calculation: Amount to be received in PV Factor (obtained Present value = x the future from table) Future Value PV of \$1 1 - - 2 3 An annuity is a series of consecutive payments that are: An equal dollar amount each period Interest periods of equal length (year, half a year, quarter, or month) An equal interest rate each interest period Present value of an annuity – the value now of a series of equal amounts to be received (or paid out) for some specified number of periods in the future o Calculation: Present value of Annuity amount PV of an annuity Factor = x an annuity paid/received each period (obtained from table) PV of an annuity 1 Annuity Amount 2 Annuity Amount 3 Annuity Amount Accounting 215 Autumn 2013 Notes Payable On November 1, 2012, Neiman Marcus borrowed \$4.8 million cash from Texas Capital Bank for working capital purposes and signed an interest-bearing note due in six months. The interest rate was 8 percent per year payable at maturity. The accounting period ends December 31. Requirements: 1. Give the journal entry to record the note on November 1. 2. Give any adjusting entry required at the end of the annual accounting period. 3. Give the journal entry to record payment of the note and interest on the maturity date, April 30, 2013. Contingencies The ink-jet printing division of Environmental Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December 31, 2012. 1. Environmental Printing was sued for \$10 million by Addamax. Plainti...
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## This document was uploaded on 02/09/2014.

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