NutraLabs, Inc., leased a protein analyzer to Werner Chemical, Inc., on Septembe

Question

NutraLabs, Inc., leased a protein analyzer to Werner Chemical, Inc., on September 30, 2016. NutraLabs manufactured the machine at a cost of $5.15 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $388,285, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2016. NutraLabs implicit interest rate is 16%. (EVof$1, P/of $1, FVA of S1, PVA of S1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required at September 30, 2016 Present value 2. What amounts related to the lease would NutraLabs report in its balance sheet at December 31, 2016 (ignore taxes)? Net receivable December 31, 2016 (ignore taxes)? Income effect 4. What amounts related to the lease would NutraLabs report in its statement of cash flows for the year ended December 31, 2016 (ignore taxes)? Interest revenue Lease receivable

Explanation / Answer

ans 1 Present value 5488000 N=5 years*4=20 i=16/4=4% 388285*(1+PVIFA(4%,19)) 388285*(1+13.1339) ans 2 PMT Int Principle payment Bal 5488000 30-Sep 388285 388285 5099715 31-Dec 388285 203989 184296 4915418 31-Mar 388285 196617 191668 4723750 30-Jun 388285 188950 199335 4524415 net Receivable 4915418 ans 3 Income effect Interest revenue 203989 ans 4 Interest revenue 203989 Lease receivable (388285+184296) 572581

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