Marigold Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $196,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. ● The lease requires payments of $43,896 at the beginning of each year starting January 1, 2019. ● At the end of the lease term, the equipment is to be returned to the lessor. ● Lantus’ implied interest rate is 6%, while Marigold’s borrowing rate is 7%. Marigold uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE.Determine the present value of the minimum lease payments.
Marigold Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $196,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. ● The lease requires payments of $43,896 at the beginning of each year starting January 1, 2019. ● At the end of the lease term, the equipment is to be returned to the lessor. ● Lantus’ implied interest rate is 6%, while Marigold’s borrowing rate is 7%. Marigold uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE.Determine the present value of the minimum lease payments.
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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
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Marigold Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $196,000. The terms of the lease are as follows:
| ● | The lease term begins on January 1, 2019, and runs for 5 years. | |
| ● | The lease requires payments of $43,896 at the beginning of each year starting January 1, 2019. | |
| ● | At the end of the lease term, the equipment is to be returned to the lessor. | |
| ● | Lantus’ implied interest rate is 6%, while Marigold’s borrowing rate is 7%. Marigold uses straight-line |
Assume that both companies follow ASPE.Determine the present value of the minimum lease payments.
Present value please show me how to do the calculation in exce
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