What is the amount of principal reduction recorded

Assignment Help Financial Management
Reference no: EM132406661

Question

Cullumber, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $354152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4 year useful life and no salvage value.

Cullumber, Inc.'s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Cullumber, Inc.) is 9%. Assuming that this lease is properly classified as a capital lease, what is the amount of principal reduction recorded when the second lease payment is made in Year 2?

PV Annuity Due PV Ordinary Annuity

9%, 4 periods 3.53129 3.23972

11%, 4 periods 3.44371 3.10245

Reference no: EM132406661

Questions Cloud

Performing purchasing agent duties business : Performing Purchasing Agent Duties Business is booming for Waters, Inc., a growing customer service fulfillment business.
Write down the new constraint to limit the portfolio risk : In the Investment Strategy Case, suppose the maximum acceptable risk for the portfolio is 0.04. Write down the new constraint to limit the portfolio risk
Compute the direct labor rate variance. the direct labor : Javonte Co. set standards of 3 hours of direct labor per unit of product and $15.60 per hour for the labor rate. During October, the company uses.
Explain what is meant by the time value of money : Explain what is meant by the time value of money, and how is it relevant to the captial budgeting process?
What is the amount of principal reduction recorded : Cullumber, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $354152, with the first payment due.
At what amount should the land be carried on bravos books : Eight years ago, Bravo company purchased land for $170,000. The current fair market value of the land is $421,0000. the rate of general inflation.
What would be the effective rate of interest : What would be the effective rate of interest? (Use calendar year. Do not round intermediate calculations. Round your answer to the nearest hundredth percent.)
Calculate the amount on the balance sheet : In your audit of Donald Martin Company, you find that a physical inventory on December 31, 2020, showed merchandise with a cost of $399,450.
Identify effective leadership traits : Identify effective leadership traits. Search for 10 business leaders who exemplify the selected leadership traits.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the earnings per share for the company

Assume a stock selling for $50.36 has a dividend yield of 1.7 percent and a PE ratio of 18.4. What is the earnings per share (EPS) for the company?

  What are tax consequences to parties involved in sales

What are the tax consequences to the parties involved in the following sales?

  Using the straight-line method for the interest deduction

What will these bonds sell for at issuance? Repeat part (b) using the straight-line method for the interest deduction.

  What is crisps required return

An analyst has modeled the stock of Crisp Trucking using a two-factor APT model.

  Firm does not undertake investment opportunity

What is the value per share of the company’s stock assuming the firm does not undertake the investment opportunity?

  Current annual cash dividend policy

What is the price of this stock today if the dividend will be paid for 11 years? (constant dividend) and the stock is sold in year 14 for ?$25?

  The weights used in calculation of wacc for common stock

Accessory Industries has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $22 per share, the preferred shares are selling for $10.50 per share,..

  Calculate for each bond the percentage price change

A zero-coupon bond with 2.5 years to maturity has a yield to maturity of 25% per annum. A 3-year maturity annual-pay coupon bond has a face value of $1000 and a 25% coupon rate. The coupon bond also has a yield to maturity of 25%. Does the longer mat..

  Developed a new home entertainment product real sound units

Wilson Sound Inc. has developed a new home entertainment product Real Sound Units which enhances the sound of DVDs for high-end home entertainment systems. Wilson has an 18% cost of capital and faces an average tax rate of 30% and a marginal tax rate..

  Difference in annual percentage rate-effective annual rate

What effect does compounding interest more frequently than annually have on (a) the future value, and (b) the effective annual rate (EAR)? Explain. How would you explain the difference between the annual percentage rate (APR) and effective annual rat..

  Learning disabilities diagnostic work-ups

How much profit will the clinic make in the first year if they can schedule 10 patients per day (50 per week) for learning disabilities diagnostic work-ups?

  What is your pnl from delta and gamma and theta for that day

If underlying closed at 99 one day after your purchase , what is your PnL from delta, gamma, and theta for that day?

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