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Determine the present value of the lease payments

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Problem - Werner Chemical, Inc., leased a protein analyzer on September 30, 2013. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2013. Werner's incremental borrowing rate is 12%. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The useful life of the equipment is five years. Use PVAD of $1.

Required:

1. Determine the present value of the lease payments at September 30, 2013.

2. What pretax amounts related to the lease would Werner report in its balance sheet at December 31, 2013?

3. What pretax amounts related to the lease would Werner report in its income statement for the year ended December 31, 2013?

4. What pretax amounts related to the lease would Werner report in its statement of cash flows for the year ended December 31, 2013?

Reference no: EM131875983

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