This will allow for it to be listed on the income statement and not the balance sheet. The charge was for $20,000 due at the end of the year with the five percent interest rate assessed yearly. Capital leases are also depreciated over the length of the usefulness life of the equipment. The remaining lease payments will be recorded as a liability and the remainder as an asset. The interest will be deducted as interest expense and the depreciation of the equipment as depreciation expense. Reducing the net income could potentially lower taxes with a capital lease then of its operational lease. Postretirement Plan Postretirement benefits are Pensions, Health Insurance, and Life Insurance. Postretirement benefits plans can have a huge financial impact on companies in the short- and long-term. Peyton Approved has revised it postretirement plan. It will now provide health insurance to retired employees. The short- and long-term financial implications will be reported.
ACC 309 Milestone Two 3 There are 60 employees who will receive benefits, the estimated pension liability is $107,041.70 but, will be accruing while they still work. The estimated cost of retired employees’ health insurance is $43,718.91. Interest cost are an additional liability created as well because the employees are another year to their postretirement benefits paying out.
ACC 309 Milestone Two 4 References Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and analysis (2nd ed.). Boston, MA: Cengage Learning.