On August 1, 1993, Creative Works (lessee) and Netsis Computer Industries (lessor) signed a lease with the following terms:
1. Term: 5 years
2. Annual payments of $39,000
3. Implicit interest rate (not known to lessee) 10%
4. Lessor retains ownership of asset at end of lease
5. Fair value of asset $168,834
6. Cost of asset $130,000 (not known to lessee)
7. Incremental borrowing rate: 12%
8. First payment due 8/1/93
9. Estimated useful life of asset: 7 years
10. No collection or cost uncertainties for lessor
11. Est. fair value of asset at end of lease: $10,000
12. The residual value is NOT guaranteed by lessee
13. A commission of 1% of the sales price (PVMLP) is paid to the salesperson who negotiated the lease.
14. Lessor and lessee both use straight-line depreciation method for fixed assets.
Answer the following questions:
a. Classify this lease from the perspective of the lessee. Explain.
b. Prepare all necessary journal entries for Creative Works at 8/1/93 and 12/31/93 (end of fiscal year).
c. Classify this lease from the perspective of the lessor. Explain.
d. Prepare all necessary journal entries for Netsis Computer Industries (CCI) at 8/1/93 and 12/31/93 (end of fiscal year).
There is no Title Transfer and no BPO (business process outsourcing). The lease term is 71% of the economic ...
The annual payments for leases are examined.
Linear Programming: Sensitivity Analysis and Interpretation of Solution
Perform an analysis of Reep Construction's leasing problem and prepare a report for Bob Reep that summarizes your findings. Be sure to include information on and analysis of the following items.
1. The optimal leasing plan
2. The costs associated with the optimal leasing plan
3. The cost for Reep Construction to maintain its current policy of no layoffsView Full Posting Details