Illustrate what journal entries would krause record

Assignment Help Financial Accounting
Reference no: EM13124100

"Krause Company on January 1, 2012, enters into a five-year noncancelable lease, with four renewal options of one year each, for equipment having an estimated useful life of 10 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $3,000,000. Krause's incremental borrowing rate is 8%. Krause uses the straight-line method to depreciate its assets. The lease contains the following provisions:
1. Rental payments of $219,000 including $19,000 for property taxes, payable at the beginning of each six-month period.
2. A termination penalty assuring renewal of the lease for a period of four years after expiration of the initial lease term.
3. An option allowing the lessor to extend the lease one year beyond the last renewal exercised by the lessee.
4. A guarantee by Krause Company that Daly Corp. will realize $100,000 from selling the asset at the expiration of the lease. However, the actual residual value is expected to be $60,000.

Instructions

(a) What kind of lease is this to Krause Company?

(b) What should be considered the lease term?

(c)What are the minimum lease payments?

(d) What is the present value of the minimum lease payments? (PV factor for annuity due of 20 semi-annual payments at 8% annual rate, 14.13394; PV factor for amount due in 20 interest periods at 8% annual rate, .45639.) (Round to the nearest dollar.)

(e) What journal entries would Krause Co. record during the first year of the lease? (Include an amoritization schedule through 1/1/13 and round to the nearest dollar.)"

Reference no: EM13124100

Questions Cloud

How many card holders be sampled if standard deviation given : The standard deviation is thought to be $750. How many card holders should be sampled? Your company charges a set dollar amount for each account in the sample.
Does fasb charge for its statements : Can you oftain a copy of the full text of these statements from this web site? Does FASB charge for its statements, or are they provided free of charge?
Compute the overhead controllable variance : Earth Company expects to operate at 86% of its productive capacity of 52,000 units per month. At this planned level, the company expects to use 26,832 standard hours of direct labor.
Probability that shopper spend more than twenty five minutes : What is the probability that a shopper will spend more than 25 minutes in a store? If 200 shoppers enter a store, how many shoppers would you expect to stay in the store for more than 25 minutes?
Illustrate what journal entries would krause record : Illustrate what journal entries would Krause Co. record during the first year of the lease? (Include an amoritization schedule through 1/1/13 and round to the nearest dollar.)"
What is annes annual after-tax rate of return : Anne's marginal income tax rate is 30 percent. She purchases a corporate bond for $10,000 and the maturity, or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is Anne's annual after-tax rate of return fro..
Maximizing the profits from joint products : Which of the following is not a step needed to maximize the profits from joint products?
The process of writing and editing : Write a narrative essay, 350-500 words, which explains the process of writing and editing a research paper. should include a clearly worded statement of purpose in an appropriate place such as the end of the introduction. Identify key writing and edi..
Calculate berclair’s basic and diluted earnings per share : The options are exercisable as of September 13, 2010, for 32 million common shares at an exercise price of $56 per share. During 2011, the market price of the common shares averaged $70 per share. Calculate Berclair’s basic and diluted earnings pe..

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd