Abbott Equipment leased a protein analyzer to Werner Chemical, Inc. on September

Question

Abbott Equipment leased a protein analyzer to Werner Chemical, Inc. on September 30, 2018. Abbott purchased the machine from NutraLabs, Inc., at a cost of $5.4 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $352,393, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2018. Abbot's implicit interest rate is 12%. (EyofS1, PVors1.BA of$1, PVAof $1. EVAD of$1 and PVADof$9 (Use appropriate factor(s) from the tables provided.) Required: 1. What pretax amounts related to the lease would Abbott report in its balance sheet at December 31, 2018? 2. What pretax amounts related to the lease would Abbott report in its income statement for the year ended December 31, 2018? 3. What pretax amounts related to the lease would Abbott report in its statement of cash flows for the year ended December 31, 2018? Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 What pretax amounts related to the lease would Abbott report in its balance sheet at December 31, 2018 and income statement for the year ended December 31, 2018? (Enter your answer in whole dollars. Round your intermedlate and final answers to nearest whole dollar.) 1. Lease receivable Interest revenue

Explanation / Answer

Answer 1. PV of Lease Payments = $352,393 X 15.32380 (PV of annuity due of $1: n = 20, i = 3%) PV of Lease Payments = $5,400,000 (Approx.) Receivable Intial Balance, Sep 30, 2018          5,400,000 Sep 30, 2018 Reduction              352,393 Dec 31, 2018 Reduction - $352,393 - 3% X ($5,400,000 - $352,393)              200,965 Dec 31, 2018 - Lease Receivable          4,846,642 The Receivable recpalaces the $5,400,000 Machine in the Balance Sheet Answer 2. Interest Revenue - For the Year ended Dec 31, 2018 Sep 30, 2018 - Interest Revenue                         -   Dec 31, 2018 - Interest Revenue - 3% X ($5,400,000 - $352,393)              151,428 Interest Revenue for 2018              151,428 Answer 3. Finance Lease          5,400,000 (As a Non Cash Investing Activity) Interest Portion              151,428 (As a Cash Inflow from Operating Activities) Principal Portion              553,358 (As a Cash Inflow from Investing Activities)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.