Gawain's balance sheet for at 31/12/X1 is shown below Buildings Equipment Inventory Cash & Receivables £'000 £'000 450 2,100 £1NV Shares Reserves 1800 975 1,075 150 10% Loan Stock Payables 600 400 3,775 Equity & Liabilities 3,775 Assets Assume that new plant could have been purchased on 01/01/X1 as follows: a) Buy new plant (fair value £600,000, life 6 years) from a 2:9 rights issue made at a premium of 50p per share. b) Instead, lease this plant over 6 years with interest at 20% together with annual repayments of £180,000. Prepare amended balance sheets at 31/12/X1 for each option a) and b) above. c) Contrast Finance Leases with Operating Leases
Gawain's balance sheet for at 31/12/X1 is shown below Buildings Equipment Inventory Cash & Receivables £'000 £'000 450 2,100 £1NV Shares Reserves 1800 975 1,075 150 10% Loan Stock Payables 600 400 3,775 Equity & Liabilities 3,775 Assets Assume that new plant could have been purchased on 01/01/X1 as follows: a) Buy new plant (fair value £600,000, life 6 years) from a 2:9 rights issue made at a premium of 50p per share. b) Instead, lease this plant over 6 years with interest at 20% together with annual repayments of £180,000. Prepare amended balance sheets at 31/12/X1 for each option a) and b) above. c) Contrast Finance Leases with Operating Leases
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question
![Gawain's balance sheet for at 31/12/X1 is shown below
Buildings
Equipment
Inventory
Cash & Receivables
£'000
£'000
450
2,100 £1NV Shares
Reserves
1800
975
1,075
150 10% Loan Stock
Payables
600
400
3,775 Equity & Liabilities
3,775
Assets
Assume that new plant could have been purchased on
01/01/X1 as follows:
a)
Buy new plant (fair value £600,000, life 6 years) from a
2:9 rights issue made at a premium of 50p per share.
b)
Instead, lease this plant over 6 years with interest at 20%
together with annual repayments of £180,000.
Prepare amended balance sheets at 31/12/X1 for each
option a) and b) above.
c)
Contrast Finance Leases with Operating Leases](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F739b53f9-9c51-4f85-88c4-e1bb6b7321a1%2F1250ef98-4af3-4fc8-b68d-73a85c6ee033%2Fe6hrf1_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Gawain's balance sheet for at 31/12/X1 is shown below
Buildings
Equipment
Inventory
Cash & Receivables
£'000
£'000
450
2,100 £1NV Shares
Reserves
1800
975
1,075
150 10% Loan Stock
Payables
600
400
3,775 Equity & Liabilities
3,775
Assets
Assume that new plant could have been purchased on
01/01/X1 as follows:
a)
Buy new plant (fair value £600,000, life 6 years) from a
2:9 rights issue made at a premium of 50p per share.
b)
Instead, lease this plant over 6 years with interest at 20%
together with annual repayments of £180,000.
Prepare amended balance sheets at 31/12/X1 for each
option a) and b) above.
c)
Contrast Finance Leases with Operating Leases
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