How rhone-metro calculated the annual lease payment

Assignment Help Financial Accounting
Reference no: EM131795676

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2013, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2017, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $750,000 to manufacture and has an expected useful life of six years. Its normal sales price is $826,899. The expected residual value of $30,000 at December 31, 2017, is not guaranteed. Equal payments under the lease are $228,000 (including $3,000 executory costs) and are due on December 31 of each year. The first payment was made on December 31, 2013. Collectibility of the remaining lease payments is reasonably assured, and Rhone-Metro has no material cost uncertainties. Western Soya's incremental borrowing rate is 10%. Western Soya knows the interest rate implicit in the lease payments is 8%. Both companies use straight-line depreciation. (FV of $1 PV of $1 FVA of $1 PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

Show how Rhone-Metro calculated the $228,000 annual lease payments

 

Reference no: EM131795676

Questions Cloud

What is the average contribution margin percent : Aroma has an average selling price of SI 5 per item with an average variable costs at S4.50 per item. Employees earn $7/hour and the rent can be broken down.
What is the firm balance of current assets : Asset Management and Profitability Ratios You have the following information on Universe It Ts, Inc.: sales to working capital = 17 times.
Complete and balance the acid-base equations : Chrysotile has the following percent composition: 28.03% Mg, 21.60% Si, 1.16% H, and 49.21% O. The molar mass for chrysotile is 520.8 g/mol
Compute the contribution margin per unit : Jennet Company manufactures and sells three products. Compute the contribution margin per unit of the limited resource (machine hour) for each product
How rhone-metro calculated the annual lease payment : Show how Rhone-Metro calculated the $228,000 annual lease payments - Both companies use straight-line depreciation
Determine the given problem as per the requirement : Would you accept or reject this project if your required rate of return is 14% and your decision criteria is a four-year discounted payback?
What volume of oxygen gas is required to react : What volume of oxygen gas is required to react completely to produce 340 L of hydrogen cyanide? Assume all reactant and product volumes.
Transferring strategic plan into a reality : Transferring strategic plan into a reality can take more than planning.
Calculate the company break-even point in dollars : City Electronix sells television sets and DVD players. Calculate the company's break-even point in dollars

Reviews

Write a Review

Financial Accounting Questions & Answers

  Illustrate what is the amount of bond issue costs

During the year, Hamlet Inc. paid $22,000 to have bond certificates printed and engraved, paid $110,000 in legal fees, paid $12,000 to a CPA for registration information, and paid $190,000 to an underwriter as a commission. Illustrate what is the..

  Create the required journal entries for the transactions

The projected cost is $2 million. A bond issue for $1.2 million has been authorized, and the remainder is supposed to come from a contribution of $800,000 from the general fund. The bonds sold for $1.3 million, a premium of $100,000. Create the requi..

  Solution for labor costsand justify it

Explain wheather you would have chosen a different solution for labor costsand justify it

  Find what are the forecasted levels of the line of credit

Now assume that the growth in sales is only 3%. What are the forecasted levels of the line of credit and special dividends?

  What pressures motivated miller to embezzle

How does Miller fit the profile of the average fraud perpetrator? How does he differ? How did these characteristics make him difficult to detect? What pressures motivated Miller to embezzle? How did Miller rationalize his actions? Miller had a framed..

  Equipment will be depreciated under the straight

This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased.

  Based on historical experience and forecasted sales

Background Mix Master (MM) manufactures cordless mixers for use in the kitchens of consumers. MM sells to retailers, which sell the mixers to the ultimate consumer. One of MM’s retail customers is Kitchen Hardware (KH). The agreement between MM and K..

  Prepare a cash budget and a schedulenbsp of expected cash

prepare a cash budget and a schedulenbsp of expected cash collections for the data furnished below.jodi horton

  Considering eliminating its mountain bike division

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,300. The division sales for the year were $1,053,000 and the variable costs were $863,000. The fixed costs of the divi..

  Discuss key forces to consider when analyzing an industry

Discuss the five key forces to consider when analyzing an industry. How do these forces impact the balanced scorecard - how to gain maximum learning

  Module 11 what are the maturities on intels long-term debt2

module 11 what are the maturities on intels long-term debt?2 what are intels projected obligations on long-term debt

  Prepare the journal entry to record the first fixed payment

1.On January 1, Seneca Asset Management enters into a contract with a client to provide fund management services for one year.

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