Balance sheet relative to the lease arrangement

Reference no: EM13913767

Ludwick Steel Company as lessee signed a lease agreement for equipment for 5 years, beginning December 31, 2012. Annual rental payments of $60,100 are to be made at the beginning of each lease year (December 31). The taxes, insurance, and the maintenance costs are the obligation of the lessee. The interest rate used by the lessor in setting the payment schedule is 9%; Ludwick's incremental borrowing rate is 11%. Ludwick is unaware of the rate being used by the lessor. At the end of the lease, Ludwick has the option to buy the equipment for $1, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Ludwick uses the straight-line method of depreciation on similar owned equipment.

a) Prepare the journal entry, that should be recorded on December 31, 2012, by Ludwick. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

b) Prepare the journal entry or entries, with explanations, that should be recorded on December 31, (Prepare the lease amortization schedule for all five payments

c) Prepare the journal entry or entries, with explanations, that should be recorded on December 31,

d) What amounts would appear on Ludwick's December 31, 2014, balance sheet relative to the lease arrangement?

Reference no: EM13913767

Questions Cloud

Prepare a classified balance sheet for jasons hardware corp : Prepare a classified balance sheet for Jason's Hardware Corporation. Business application- Compute Jason's Hardware's current ratio and debt to equity ratio.

What is present value of acquired tax loss carry forwards : In Sept. 2008, the IRS changed tax laws to allow banks to utilize the tax loss carry forwards of banks they acquire to shield their future income from taxes (prior law restricted the ability of acquirers to use these credits). what is the present val..

Find the critical value za : 1. Find the critical value za/2that corresponds to a degree of confidence of 98%. Select one: a. 2.575 b. 1.75 c. 2.33 d. 2.05

Why must some employers file form 1096 : Why must some employers file Form 1096?

Balance sheet relative to the lease arrangement : d) What amounts would appear on Ludwick's December 31, 2014, balance sheet relative to the lease arrangement?

Shoupe company was subject to the alaska state : During 2013, Shoupe Company was subject to the Alaska state unemployment tax of 5.1%. The company's taxable wages for FUTA were $93,400 and for SUTA, $194,300.

Management determination of the specific sources and uses : Government assessment of whether company is able to pay taxes as they become due-Management determination of the specific sources and uses of cash.

What role does technology play in global public relations : What are some ways to share important market research across a global organization? If you were responsible for gathering research for a new market, how would you share it with your global colleagues?

What are the penalties imposed on employees for filing false : What are the penalties imposed on employees for filing false information on Form W-4?

User Account

All Pages