Calculate the present value of the minimum lease payments

Assignment Help Accounting Basics
Reference no: EM13867207

Use the information in RE21-6. However, assume that there is no bargain purchase option and that Montevallo guarantees the $20,000 estimated residual value at the end of the 10-year lease. Calculate the present value of the minimum lease payments.

In RE21-6, Montevallo Corporation leased equipment from Folio Company. The lease term is 10 years, requires payments of $25,000 at the end of each year, and contains a bargain purchase option. At the end of the lease Montevallo has an option to pay $4,000 (which is much less than the estimated fair value at that time) to purchase the equipment. The equipment has a fair value at the inception of the lease of $175,000 and an estimated useful life of 20 years. The lease agreement stipulates that the Folio Company receive a rate of return of 8% each year, which is lower than Montevallo 's incremental borrowing rate. Calculate the present value of the minimum lease payments. 

Reference no: EM13867207

Questions Cloud

Explain three major environmental characteristics : Identify and briefly explain three major environmental characteristics of governmental and not- for-profit organizations.
Different schedules of reinforcement : Write a 1,050- to 1,400-word paper discussing the five different schedules of reinforcement. Include the following: Describe the five schedules of reinforcement
Maximum tension and compression forces in member : Draw the influence lines for BC, JC and JI in the following bridge truss. Note that traffic will move across the top chord of the truss. Evaluate the maximum tension and compression forces in member CH caused by the following load conditions:a. Un..
What is the ideal power equation of transformer : What is the Ideal power equation of Transformer ? (with diagram and examples)
Calculate the present value of the minimum lease payments : Use the information in RE21-6. However, assume that there is no bargain purchase option and that Montevallo guarantees the $20,000 estimated residual value at the end of the 10-year lease. Calculate the present value of the minimum lease payments.
How does avoidance differ from the escape behavior : There are multiple forms of avoidance. Explain the two you feel are the most effective at changing behaviors and give an example of how you could apply the techniques. How does avoidance differ from the escape behavior
Identify the various types of entities : Identify the various types of entities that constitute governmental organizations and describe the characteristics of other organizations that when created by governments are also considered to be governmental entities.
What is annual cost of moonchems strategy of send truckloads : What is the annual cost of MoonChem's strategy of sending full truckloads to each customer in the Peoria region to replenish consignment inventory?
Emilie loves profiteroles : Emilie loves profiteroles. She makes a profiterole by combining one wit of chocolate sauce (say 8 fl az) and two puffs (stuffed with paste). She receives one unit of utility per profiterole. Bertrand just likes to mt. He receives one mat of utility p..

Reviews

Write a Review

Accounting Basics Questions & Answers

  Cedars hospital has average revenue of 180 per patient day

cedars hospital has average revenue of 180 per patient day. variable costs are 45 per patient day fixed costs total

  Present value barney smith invests in a stock that will pay

present value barney smith invests in a stock that will pay dividends of 3.00 at the end of the first year 3.30 at the

  Poduct a unit sales price 5 unit contribution margin 75

product a unit sales price 5 unit contribution margin .75 sales mix 80product b unit sales price 4 unit contribution

  Company has a joint process which produces three products

company has a joint process which produces three products called a b and c. each product may be sold at split-off or

  Which of these methods are discounted and which are not

Let's discuss the various capital budgeting methods most often used, such as the payback method, the accounting rate of return, net present value, and internal rate of return. Which of these methods are discounted and which are not? What are some ..

  On february 2 the corporation purchased goods from martin

described below are certain transactions of edwardson corporation. the company uses the periodic inventory system.1. on

  Calculate controlling interest in consolidated net income

Percy reported net income from its own operations of $720,000 in 2011 and $760,000 in 2012. Smyth reported net income of $400,000 in 2011 and $460,000 in 2012. Neither company declared dividends in either year.

  What would the companys monthly net operating income be if

perkins company produces and sells a single product. the companys income statement for the most recent month is given

  What is wolfe federal income tax withholding

Bob Wolfe's weekly gross earnings for the present week were $2,180. Wolfe has four exemptions. Using the wage bracket withholding table below with a $63 standard withholding allowance for each exemption, what is Wolfe's federal income tax with..

  You know that both internal and external users have not

you know that both internal and external users have not only the short-term success but also the long-term success of

  Redd whyte and blu agreed to divide income and loss in the

redd whyte and blu agreed to divide income and loss in the proportion to their beginning capital balances. net income

  Compute the inventory turnover ratio

Evaluate the inventory turnover ratio for 2010 by using the LIFO and FIFO cost-flow assumption methods.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd