Lease Problems Hw1
Lease Problems Hw1
Lease Problems Hw1
39,930
3,194.40 (1)
6,805.60
7,986 (2)
7,986
b.
Balance Sheet
December 31, Year 1
ASSETS
LIABILITIES
Leased property under
Lease Obligations under
capital leases $31,944 (1) capital leases.
$33,124.40 (2)
Income Statement
For Year Ended December 31, Year 1
Amortization of leased property ..................................................
Interest on leases...........................................................................
Total lease-related cost for Year 1 ...............................................
(1) $39,930 - $7,986 = $31,944
$ 7,986.00
3,194.40
$11,180.40 (3)
c.
Payments of Interest and Principal
Total
Interest
Payment of
Payment
at 8%
Principal
Year
1
2
3
4
5
10,000
10,000
10,000
10,000
10,000
$50,000
$3,194.40
2,649.95
2,061.95
1,426.90
736.80
$10,070.00
$6,805.60
7,350.05
7,938.05
8,573.10
9,263.20
$39,930.00
Principal
Balance
$39,930.00
33,124.40
25,774.35
17,836.30
9,263.20
d.
Year
1
2
3
4
5
e. The income and cash flow implications from this capital lease are apparent in
the solutions to parts c and d. The student should note that reported
expenses exceed the cash flows in earlier years, while the reverse occurs in
later years.
assets. If the leased assets are used to generate revenues, they should be
considered in ratios such as return on assets and other measures of financial
performance and condition.