Hi! Please see my attached file for the questions that I need help with. Thank you! Carrie
Hi! Please see my attached file for the questions that I need help with.
Problem 15-46 Entries for Capital Lease—Lessee; Lease Criteria
Extractor Company leased a machine on July 1, 2013, under a 10-year lease. The
economic life of the machine is estimated to be 15 years. Title to the machine passes to Extractor
Company at the expiration of the lease, and thus, the lease is a capital lease. The lease payments
total $194,000 per year (which includes executory costs of $6,000 per year), all payable in
advance annually. The incremental borrowing rate of the company is 9%, and the lessor’s implicit
interest rate is unknown. Extractor Company uses the straight-line method of amortization and
the calendar year for reporting purposes.
Give all entries on the books of the lessee relating to the lease for 2013.
Assume that the lessor retains title to the machine at the expiration of the lease, that there
is no bargain renewal or purchase option, and that the fair value of the equipment is
$1,420,000 as of the lease date. Using the criteria for distinguishing between operating
and capital leases according to FASB ASC Topic 840, what would be the amortization
expense for 2013?
Case 15-71 Deciphering Financial Statements (FedEx)
The following summary data are from the May 31, 2009, balance sheet of
. All numbers
are in millions.
A summary of future minimum lease payments under capital leases and noncancelable operating
leases with an initial or remaining term in excess of one year at May 31, 2009 is as follows (in
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Compute the following ratio values.
Debt ratio (total liabilities/total assets).
Debt ratio assuming that FedEx’s operating leases are accounted for as capital leases.
Asset turnover (sales/total assets).
Asset turnover assuming that FedEx’s operating leases are accounted for as capital leases