Reference no: EM131110381
Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2010. The following information relates to the lease agreement.
1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2010, is $700,000.
3. At the end of the lease term the asset reverts to the lessor. At the end of the lease term the asset has a guaranteed residual value of $100,000. Jensen depreciates all of its equipment on a straight-line basis.
4. The lease agreement requires equal annual rental payments, beginning on January 1, 2010.
5. The Collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.
6. Glaus desires a 10% rate of return on its investments. Jensen's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
(Assume the accounting period ends on December 31.)
(a) Discuss the nature of this lease for both the lessee and the lessor.
(b) Calculate the amount of the annual rental payment required.
(c) Compute the present value of the minimum lease payments.
(d) Prepare the journal entries Jensen would make in 2010 and 2011 related to the lease arrangement.
(e) Prepare the journal entries Glaus would make in 2010 and 2011.
Set up t accounts for the given accounts
: Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital.
|
Augment the level of national savings in the economy
: Suppose that the Government wants to augment the level of national savings in the economy and institutes a policy to reward savings behavior. Hence, borrowers face a real interest r as always, but lenders receive r(1+s) on their savings, where ‘s’ is..
|
What is the tax advantage of the merger each year
: What is the tax advantage of the merger each year for Reilly? What is the tax advantage of the merger each year for Webster? What is the maximum cash price each interested firm would be willing to pay for Hahn Textiles?
|
When the change caused by a rise in expected inflation
: "When a change in a country's nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates. When the change is caused by a rise in expected inflation, the currency depreciates."
|
Glaus leasing company agrees to lease machinery
: Glaus desires a 10% rate of return on its investments. Jensen's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
|
What behaviors would be affected
: Describe a situation when your auditory perception may be impaired. What behaviors would be affected? Why?
|
Describe diagnostic criteria utilized to diagnose disorder
: Describe the diagnostic criteria utilized to diagnose this disorder. You can utilize the DSM-IV TR diagnostic criteria or the ICD-10
|
Prepare a retained earnings statement for the current year
: Prepare an income statement for current year ended April 30, 20Y6. Prepare a retained earnings statement for the current year ended April 30, 20Y6. Prepare a balance sheet as of April 30, 20Y6.
|
Compute the monopolist profit
: From the diagram what is the profit maximizing output of the monopolist? Why? From the diagram what is the price that the monopolist charges on each unit she sells. Briefly explain. Compute the Monopolist's profit?
|