Aldridge enterprises has a long standing policy of

Assignment Help Accounting Basics

Reference no: EM13483574

Aldridge Enterprises has a long standing policy of acquiring company equipment by leasing. Early in 2011, the company entered into a lease for a new milling machine. The lease stipulates that annual payment will be made for five years. The payments are to be made in advance on December 31 of each year. At the end of the 5 year period, Aldridge may purchase the machine. Company financial records show the incremental borrowing rate to be less than the implicit interest rate. The estimated economic life of the equipment is 12 years. Aldridge uses the calender year fo reporting purposes and straight line depreciation for other equipment. In addition, the follow information about the lease is also available.

1.)annual lease payment-$55,000

2.)purchase option price-$25,000

3.)Estimated fair value of machine after 5 years-$75,000

4.)Incremental Borrowing Rate-10%

5.)Date of first lease payment-Jan 1, 2011. Instructions: Give the Journal entries that would be made on Aldridge's books for the first two years of the lease.

Reference no: EM13483574

Questions Cloud

At the beginning of the current period griffey corp had : at the beginning of the current period griffey corp. had balances in accounts receivable of 240500 and in allowance for

Ehrmann data systems is considering a project that has the : ehrmann data systems is considering a project that has the following cash flow and wacc data. what is the projects

Calculate the exercise value of the firms warrants if the : maese industries inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a

Common fixed expenses 20000 10000 are mfg overhead : joe coffee cup manufacturing company has provided you the following information for the past three months. as a new

Aldridge enterprises has a long standing policy of : aldridge enterprises has a long standing policy of acquiring company equipment by leasing. early in 2011 the company

For this textbook edition the rate 06 was used for the futa : note for this textbook edition the rate 0.6 was used for the futa tax rate for employers. the following unemployment

Does the convertible issues lower coupon rate suggest that : suppose a company simultaneously issues 50 million of convertible bonds with a coupon rate of 10 and 50 million of

Wizzkid inc is experiencing a period of rapid growth : 1.an insurance company must make a payment of 19487 in seven years. the market interest rate is 6. the companys

If a firm expects to have additional financial : if a firm expects to have additional financial requirements in the future would you recommend that it use convertibles

User Account

All Pages