Homework Help is Here – Start Your Trial Now!
Business
Finance
Schrute Company leases an automobile with a fair value of $15,005 from Rainn, Inc., on the following terms: 1.   Non-cancelable term of 50 months. 2.   Rental of $300 per month (at the beginning of each month).  3.   Shrute guarantees a residual value of $1,800 (the present value at 0.5% per month is $1,403). The expected residual value is estimated to be $1,800 at the end of the lease term. 4.   Estimated economic life of the automobile is 60 months. 5.   Schrute’s incremental borrowing rate is 6% a year (0.5% a month). Rainn’s implicit rate is unknown. What is the present value of the lease payments to determine the lease liability? Present Value of an Annuity Due with 0.5% and 60 periods: 51.98419 Present Value of an Ordinary Annuity at 0.5% and 60 periods: 48.17337352 Present Value of an Annuity Due with 0.5% and 50 periods: 44.36350 Present Value of an Ordinary Annuity with 0.5% and 50 Periods:41.56644707

Schrute Company leases an automobile with a fair value of $15,005 from Rainn, Inc., on the following terms: 1.   Non-cancelable term of 50 months. 2.   Rental of $300 per month (at the beginning of each month).  3.   Shrute guarantees a residual value of $1,800 (the present value at 0.5% per month is $1,403). The expected residual value is estimated to be $1,800 at the end of the lease term. 4.   Estimated economic life of the automobile is 60 months. 5.   Schrute’s incremental borrowing rate is 6% a year (0.5% a month). Rainn’s implicit rate is unknown. What is the present value of the lease payments to determine the lease liability? Present Value of an Annuity Due with 0.5% and 60 periods: 51.98419 Present Value of an Ordinary Annuity at 0.5% and 60 periods: 48.17337352 Present Value of an Annuity Due with 0.5% and 50 periods: 44.36350 Present Value of an Ordinary Annuity with 0.5% and 50 Periods:41.56644707

Intermediate Accounting: Reporting And Analysis
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...
See similar textbooks
icon
Related questions
Question

Schrute Company leases an automobile with a fair value of $15,005 from Rainn, Inc., on the following terms:

1.   Non-cancelable term of 50 months.
2.   Rental of $300 per month (at the beginning of each month). 
3.   Shrute guarantees a residual value of $1,800 (the present value at 0.5% per month is $1,403). The expected residual value is estimated to be $1,800 at the end of the lease term.
4.   Estimated economic life of the automobile is 60 months.
5.   Schrute’s incremental borrowing rate is 6% a year (0.5% a month). Rainn’s implicit rate is unknown.

What is the present value of the lease payments to determine the lease liability?

Present Value of an Annuity Due with 0.5% and 60 periods: 51.98419

Present Value of an Ordinary Annuity at 0.5% and 60 periods: 48.17337352

Present Value of an Annuity Due with 0.5% and 50 periods: 44.36350

Present Value of an Ordinary Annuity with 0.5% and 50 Periods:41.56644707

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Lease accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Business Its Legal Ethical & Global Environment
Business Its Legal Ethical & Global Environment
Accounting
ISBN:
9781305224414
Author:
JENNINGS
Publisher:
Cengage
Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:
9781285595047
Author:
Weil
Publisher:
Cengage
CONCEPTS IN FED.TAX., 2020-W/ACCESS
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:
9780357110362
Author:
Murphy
Publisher:
CENGAGE L
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
SEE MORE TEXTBOOKS