Reference no: EM132554198
On 1 July 2020, Mango Ltd leases an aircraft from Kulula Ltd for five years. The fair value of the aircraft is $9.5 million. Under the terms of the lease arrangement, Mango Ltd is required to make five annual payments of $2 million with the first payment due immediately. Each repayment includes $120,000 for maintenance arranged by the lessor. The lease has an interest rate of 13%. The residual value of the aircraft is $3 million, of which Mango guarantees 65%. The aircraft has a useful life of six years.
Required
Question i Calculate the present value of Mango's minimum lease payments.
Question ii Prepare journal entries in Mango's books on 1 July 2023.
Treat the following scenarios as independent e.g. your answer to (iii) does not affect your answer to (iv) and (v).
Question iii Before the lease agreement was finalized, Kulula Ltd offered Mango Ltd the opportunity to purchase the aircraft for $1.5 million at the end of the lease. Outline the benefits and risks to Mango Ltd if it accepts the proposal, providing supporting calculations.
Question iv Kulula Ltd is an aircraft manufacturer. Prepare Kulula's journal entries at inception of the lease, assuming it makes a profit of $1.5 million on the lease to Mango Ltd.
Question v Prior to the lease, Mango Ltd owned the aircraft. It had a cost of $12 million and had been depreciated by $4 million. It sold the aircraft to Kulula Ltd and immediately leased it back. Prepare Mango Ltd's journal entries for the sale portion of the lease and analyse how it benefits from this arrangement.
Use these Present Value factors to answer the questions.
Period 1 2 3 4 5
PV factor @ 13% 0.8850 0.7831 0.6931 0.6133 0.5428
PV annuity factor @ 13% 0.8850 1.6681 2.3612 2.9745 3.5173
|
How to determine what is the company wacc
: Determine What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
|
|
Outline the experimental procedures involved in carrying
: Find out how the rate of the reaction depends upon the concentration of A and Y and find the initial reaction rates for trials 4, 5 and 6.
|
|
Compute the internal rate of return for each of the projects
: Compute internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project is acceptable
|
|
Elimination reaction of n-propyl-lg with a base
: Test that the following O'Ferrall-Jencks plot applies to the elimination reaction of n-propyl-LG with a base. In the picture, LG is leaving group and B is a bas
|
|
Prepare kulula journal entries at inception of the lease
: Kulula Ltd is an aircraft manufacturer. Prepare Kulula journal entries at inception of lease, assuming makes a profit of $1.5 million on lease to Mango
|
|
What is the resulting ph and poh
: If 500ml of 0.00673 M h2SO4 is mixed with 400ml of 0.00487 M Al(OH)3 what is the resulting pH and pOH?
|
|
What is the after-tax cost of the computers
: If Jimbo purchased the computer equipment in 2019 and elected to expense the entire $865,000 under Section 179, what is the after-tax cost of the computers
|
|
Find what is the expected return on rkp
: Risk-free rate of return is currently 0.02, whereas market risk premium is 0.05. If the beta of RKP, Inc., stock is 1.6, then what is the expected return on RKP
|
|
Balanced molecular equation
: 1) the balanced molecular equation, 2) the complete ionic equation, and 3) the net ionic equation. If there is no reaction write "no reaction".
|