There are no payments for the first six months for the next

Reference no: EM13596157

Bonzo Biggie called with the following information about a lease he signed on January 11, 2011.

The lease begins on July 1, 2011.There are no payments for the first six months. For the next six months, the monthly payments are $500. Then, he will pay $750 per month for the next two years. For the final year of the lease, the payments will be $1,000 per month.The equipment that he is leasing would cost him $25,000 if he bought it outright. He will be able to use the equipment for the next ten years. His banker would charge him 12% interest on a loan of this type.Each lease payment is due on the first day of each month.

You might recall that Bonzo is a close friend of mine. He is not the brightest bulb in the pack, so to speak. At our high school graduation, we all cheered when the principal called his name. As you might imagine, there was considerable doubt about his completing high school. That aside, he is also our wealthiest client.Bonzo wants to know how this lease will affect his 2011 financial statements.

Reference no: EM13596157

Questions Cloud

The jones company has a number of financial obligations : the jones company has a number of financial obligations that are not due and payable during the correct accounting

A firms accumulated depreciation account increased 30000 : a firms accumulated depreciation account increased 30000 for the year and total plant assets at cost increased 200000.

If total liabilities increased by 20000 during a period of : if total liabilities increased by 20000 during a period of time and owners equity increased by 5000 during the same

A company sold an investment in trading securities : a company sold an investment in trading securities originally costing 30000 for 28000. at the beginning of the year the

There are no payments for the first six months for the next : bonzo biggie called with the following information about a lease he signed on january 11 2011.the lease begins on july

A firm sold an investment in securities available for sale : a firm sold an investment in securities available for sale originally costing 30000 for 28000. at the beginning of the

At the beginning of the year a firm leased equipment on a : at the beginning of the year a firm leased equipment on a capital lease capitalizing 60000 in both its lease liability

Kenneth invernesss weekly gross earnings for the week : kenneth invernesss weekly gross earnings for the week ending december 18 were 2480 and his federal income tax

Mach co operates three manufacturing departments as profit : mach co. operates three manufacturing departments as profit centers. the following information is available for its

User Account

All Pages