Incur 429000 of costs for 36-month zip contract paying 70

Reference no: EM13482540

1. Pay $238,000 to Lessor Co. as 1st annual payment on the signing of a 3-year, noncancelable computer lease to begin 11/1. Each annual payment includes $25,200 for tax and insurance, and Owl will pay maintanance cost for the equipment. Lessor Co. bought the computers for $700,000, used an implicit lease rate of 8%, and expects the life of the computers to be 4 years before they become obsolete. Owl's incremental borrowing rate is 10%. If capitalized, Owl will use the simplest method to expense. Assume that there are no book-tax differences with this lease.

2.Incur $429,000 of costs for 36-month Zip contract, paying 70% now, rest on credit, & progress bill Zip Co. for 90% of cost to date; at 12/31, estimated future costs are $1,771,000.

Reference no: EM13482540

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