Please explain me how to solve this in excel P7-12. Present Value of an Ordinary Annuity, Purchase or Lease Analysis. Fata Food Emporium decides toobtain a new refrigerator to store its meat and produce. The refrigerator has a 15-year useful life and can besold for $15,000 at the end of its useful life. Fata has two options:a. Purchase the Refrigerator: Purchase the refrigerator in cash for $100,000. Fata would have to pay allmaintenance/insurance costs, which would be $3,000 per year.b. Lease the Refrigerator: Lease the refrigerator for a 15-year period. Annual lease payments amount to$15,000 with the first payment beginning at the end of the year. The seller will pay maintenance andinsurance costs, and Fata will return the refrigerator to the seller after 15 years.Assuming that maintenance and insurance costs are paid at year-end and an interest rate of 10% compoundedannually, which option should Fata choose?

Present value annuity formula = C * [(1-(1+i)-n)/i] Where C = cash flow per period, i = rate of…

Answered: Assuming that maintenance and insurance…

Assuming that maintenance and insurance costs are paid at year-end and an interest rate of 10% compounded annually, which option should Fata choose?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
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