Lease computations
Not what you're looking for?
Enro Tech Corporation is in the business of leasing new sophisticated satellite systems. As a lessor of satellites, Encotech purchased a new system on December 31, 2011. The system was delivered the same day (by prior arrangement) to Ocular Investment Company, a lessee. The corporation accountant revealed the following information relating to the lease transaction:
Cost of system to Enco Tech $840,000.00
Estimated useful life and lease term 6 years
Expected residual value (unguaranteed) $60,000.00
Enco Tech's implicit rate of interest 12%
Ocular's incremental borrowing rate 14%
Date of first lease payment Dec. 31, 2011
Additional information is as follows:
a) At the end of the lease, the system will revert to Enco Tech.
b) Ocular is aware of Enco Tech's rate of implicit interest.
c) The lease rental consists of equal annual payments.
d) Encotech accounts for leases using the direct financing method. Ocular intends to record the lease as a capital lease. Both the lessee and the lessor
report on a calendar-year basis and elect to depreciate all assets on the straight-line basis.
Instructions:
1. Compute the annual lease payment under the lease. (Round to the nearest dollar)
2. Compute the amounts of the lease payments receivable that Encotech should recognize at the inception of the lease.
3. What are the total expenses related to the lease that Ocular should record for the year ended December 31, 2012.
Purchase this Solution
Solution Summary
Lease computations for Enro Tech Corporation are examined. The equal annual payments for lease rental rates are determined.
Purchase this Solution
Free BrainMass Quizzes
Introduction to Finance
This quiz test introductory finance topics.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Lean your Process
This quiz will help you understand the basic concepts of Lean.