Pre tax in Statement of Cash Flows, Basic Statistics

Pre tax in Statement of Cash Flows, Basic Statistics

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Advanced Equipment leased equipment to Richards Chemical, Inc. on 9/30/11. Advanced purchased the machine from Makers, Inc. at a cost of $6M. The 5-yr lease agreement calls for Richards to make quarterly lease payments of $391,548, payable each 9/30, 12/31, 3/31, and 6/30, with the first payment at 9/30/11. Advanced’s implicit interest rate is 12%:
1. What pretax amounts would Richards report in its statement of cash flows for the year ended Dec. 31, 2011?
2. What pretax amounts would Advanced report in its statement of cash flows for the year ended Dec. 31, 2011?
3. Assume Makers manufactured the machine at a cost of $5M and that Richards leased the machine directly from Makers. What pretax amounts would Makers report in its statement of cash flows for the year ended Dec. 31, 2011?

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