PROBLEM V On January 1 2018 Lancer Corporation leased equipment from Crescent Co
ID: 2555572 • Letter: P
Question
PROBLEM V On January 1 2018 Lancer Corporation leased equipment from Crescent Corp under a ten-year lease agreement specifying annual payments of $30,000 beginning January 1, 2018, and at each December 31 thereafter through 2026 The equipment had a cost of $180,000 and was expected to have a useful life of 13 years with no residual value. Crescent seeks a 12% return on its lease investments. By this agreement, the lease is deemed to be an operating lease. Present Value of an annuity due of 1 for 10 periods at 12% Present value of an ordinary annuity of 1 for 10 periods at 12% 5.65022 Present value of 1 for 10 periods at 12%.........................................-.032197 ..6.32825 Required: a) Compute Lancer's lease liability. b) Compute total lease expense for 2018 to be reported on Income statement. ut t amert jaton a penve c) Determne the amou fur the year 301s.Explanation / Answer
1-
lease liability
annual payment*PVAF due at 12% for 10th year period
30000*6.32825
189847.5
2-
total interest expense
balance in lease liability in year end *interest rate
159847.5*12%
19181.7
3-
amount of amortization
lease payment-interest expense
30000-19181.7
10818.3
Amortization schedule
Year
beginning balance
annual payment
Interest
amortization
Year end balance
0
189847.5
30000
0
30000
159847.5
1
159847.5
30000
19181.7
10818.3
149029.2
2
149029.2
30000
17883.5
12116.5
136912.7
3
136912.7
30000
16429.52
13570.48
123342.2
4
123342.2
30000
14801.07
15198.93
108143.3
5
108143.3
30000
12977.2
17022.8
91120.49
6
91120.49
30000
10934.46
19065.54
72054.95
7
72054.95
30000
8646.594
21353.41
50701.54
8
50701.54
30000
6084.185
23915.81
26785.73
9
26785.73
30000
3214.288
26785.71
0.017319
1-
lease liability
annual payment*PVAF due at 12% for 10th year period
30000*6.32825
189847.5
2-
total interest expense
balance in lease liability in year end *interest rate
159847.5*12%
19181.7
3-
amount of amortization
lease payment-interest expense
30000-19181.7
10818.3
Amortization schedule
Year
beginning balance
annual payment
Interest
amortization
Year end balance
0
189847.5
30000
0
30000
159847.5
1
159847.5
30000
19181.7
10818.3
149029.2
2
149029.2
30000
17883.5
12116.5
136912.7
3
136912.7
30000
16429.52
13570.48
123342.2
4
123342.2
30000
14801.07
15198.93
108143.3
5
108143.3
30000
12977.2
17022.8
91120.49
6
91120.49
30000
10934.46
19065.54
72054.95
7
72054.95
30000
8646.594
21353.41
50701.54
8
50701.54
30000
6084.185
23915.81
26785.73
9
26785.73
30000
3214.288
26785.71
0.017319
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