Accounting

Brown Leasing Service recently purchased drilling equipment for $218,705 and wants to lease it to Huss Excavation Company. If Huss accepts, it will sign the lease agreement on May 1, 2011. The equipment has an estimated useful life of five years, and the lease term is for five years. During the period of the lease, Huss will be responsible for all repairs and maintenance of the leased property. The lease agreement calls for Huss to make five annual lease payments of $56,227.41 starting May 1, 2012. The interest rate is 9 percent. Huss has asked you to help it plan for the impact of this lease.

Required:

Don't use plagiarized sources. Get Your Custom Essay on
Accounting
Just from $13/Page
Order Essay

A. What makes this lease qualify as a capital lease?

B. What is the value of the equipment and the amount of the liability generated by this transaction?

C. What are the cash flows associated with the first two years of the lease?

D. What is the interest cost incurred in each of the first two years of the lease?

E. How does the lease liability change over the first two years of the lease?

Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.