January 1, 2024, Paradise Partners decides to upgrade recreational equipment at its resorts. The company is contemplating whether to purchase or lease the new equipment. Use PV of $1 and PVA of $1. (Use appropriate factor(s) from the tables provided.) Required: 1. The company can purchase the equipment by borrowing $292,000 with a 21-month, 12% installment note. Payments of $15,484.98 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 21-month lease for the equipment by agreeing to pay $12,939.50 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company's amount of reported debt, and by how much? 4. Suppose the equipment has a total value of $104,000 at the end of the 21-month period, which option (purchasing with installment note or leasing) would likely be better?

January 1, 2024, Paradise Partners decides to upgrade recreational equipment at its resorts. The company is contemplating whether to purchase or lease the new equipment. Use PV of $1 and PVA of $1. (Use appropriate factor(s) from the tables provided.) Required: 1. The company can purchase the equipment by borrowing $292,000 with a 21-month, 12% installment note. Payments of $15,484.98 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 21-month lease for the equipment by agreeing to pay $12,939.50 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company's amount of reported debt, and by how much? 4. Suppose the equipment has a total value of $104,000 at the end of the 21-month period, which option (purchasing with installment note or leasing) would likely be better?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7MC: Using the information provided, what transaction represents the best application of the present...

See similar textbooks

Similar questions

On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The firstthree are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be$40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a10% annual rate.Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building onJanuary 1, 2018?2. How much interest expense on this note will Montgomery recognize in 2018?
Blossom Greenhouses Ltd. signed a 15-year, 4.0%, $910,000 loan on September 30, 2024, to help finance a new state-of-the-art greenhouse with an associated renewable energy source. The loan terms provide for semi-annual payments of $40,631 principal and interest. Payments are due on March 31 and September 30. The company's year end is September 30. (a) Your Answer Correct Answer Your answer is correct. Prepare an instalment payment schedule for the first two years. (Round answers to 0 decimal places, e.g. 5,255.) Semi-Annual Interest Period Cash Payment Interest Expense Reduction of Principal Principal Balance 910,000 Sept. 30, 2024 40631 18200 22431 887569 Mar. 31, 2025 Sept. 30, 2025 40631 17752 22879 864,690 40631 17294 23337 841353 Mar. 31, 2026 Sept. 30, 2026 40631 16827 23804 817549 SUPPO (b) Record the receipt of the loan on September 30, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No…
May I get complete and correct answer with working for all . Thanks 1. The company can purchase the equipment by borrowing $218,000 with a 25-month, 12% installment note. Payments of $9,898.67 are due at the end of each month, and the first installment is due on January 31, 2024. Record the issuance of the installment note payable for the purchase of the equipment. 2. The company can sign a 25-month lease for the equipment by agreeing to pay $7,900.78 at the end of each month, beginning January 31, 2024. At the end of the lease, the equipment must be returned. Assuming a borrowing rate of 12%, record the lease. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) 3. As of January 1, 2024, does the installment note or the lease have a greater effect on increasing the company’s amount of reported debt, and by how much? (Round other intermediate and final answers to the nearest whole dollar amount.) 4. Suppose the…
On January 1, 2021, the Montgomery Company agreed to purchase a building by making six payments. The first three are to be $26,000 each, and will be paid on December 31, 2021, 2022, and 2023. The last three are to be $41,000 each and will be paid on December 31, 2024, 2025, and 2026. Montgomery borrowed other money at a 12% annual rate. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building on January 1, 2021?2. How much interest expense on this note will Montgomery recognize in 2021?
ok nces Braxton Technologies, Incorporated, constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2024. • A&G paid for the conveyor by Issuing a $150,000, four-year note that specified 8% Interest to be paid on December 31 of each year, and the note is to be repald at the end of four years. • The conveyor was custom-bullt for A&G, so Its cash price was unknown. By comparison with similar transactions It was determined that a reasonable Interest rate was 12%. . Required: 1. Prepare the Journal entry for A&G's purchase of the conveyor on January 1, 2024. 2. Prepare an amortization schedule for the four-year term of the note 3. Prepare the Journal entry for A&G's third Interest payment on December 31, 2026. 4. If A&G's note had been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2024, what would be the amount of each Installment? 5. By considering the installment payment of requirement 4, prepare…
FinanceCo lent $8 million to Corbin Construction on January 1, 2021, to construct a playground. Corbin signed a three-year, 6% installment note to be paid in three equal payments at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. Prepare the journal entry for FinanceCo’s lending the funds on January 1, 2021.2. Prepare an amortization schedule for the three-year term of the installment note.3. Prepare the journal entry for the first installment payment on December 31, 2021.4. Prepare the journal entry for the third installment payment on December 31, 2023.
On December 31, 2020, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2024. Faital Company's credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $70,000 salvage value. Instructions (Round answers to the nearest cent.) a. Prepare the journal entry for the purchase on December 31, 2020. b. Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2021. c. Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2022.
Prepare all journal entries and adjusting journal entries necessary to record the information below for year 2022: On November 15, 2022, WTG purchased a patent for $49,500. It used an installment loan to purchase the patent. Payments are due on May 15 and November 15 of every year (so the first payment is due May 15 next year) for the next 5 years. The interest rate is 7%. See amortization table below: ■ Patent Loan Amortization Principal Interest Years Payments/year Payment Date 5/15/23 11/15/23 5/15/24 11/15/24 5/15/25 11/15/25 5/15/26 11/15/26 5/15/27 11/15/27 $49,500 7% 5 2 5,952 Interest Principal Payment Balance 49,500 5,952 45,281 5,952 40,913 5,952 36,393 5,952 5,952 5,952 5,952 5,952 5,952 5,952 1,733 4,219 1,585 4,367 4,520 4,678 4,842 941 5,011 765 5,187 584 5,368 396 5,556 201 5,751 1,432 1,274 1,110 31,715 26,873 21,862 16,675 11,307 5,751 0
Manatee Corporation purchased a special conveyor system on December 31, 2025. The purchase agreement stipulated that Manatee should pay $50,000 at the time of purchase and $15,000 at the end of each of the next 5 years. The conveyor system should be recorded on December 31, 2025, at what amount, assuming an appropriate interest rate of 8%?
Megamind Inc. purchases equipment for $250000. They pay $50,000 cash and the supplier finances the remainder with a note. Terms are 2 years, no installment payments, full amount paid at the end of the 2 years, interest rate of 2%. Megamind’s interest rate for debt of a similar risk profile is 5%. Record the entries required for 2022 and 2023. The equipment was purchased on January 1, 2022. Show all steps. Use Date, Cash, Interest, Difference, and PV as headings for Amortization Schedule. Show and explain the difference between Net method and Gross Method.
At the end of 2022, the following information is available for Great Adventures. Additional interest for five months needs to be accrued on the $32,200, 6% loan obtained on August 1, 2021. Recall that annual interest is paid each July 31. Assume that $12,200 of the $32,200 loan discussed above is due next year. By the end of the year, $20,000 in gift cards have been redeemed. The company had sold gift cards of $27,200 during the year and recorded those as Deferred Revenue. Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The company believes the likelihood of payment occurring is probable, and the estimated amount to be paid is $14,200. For sales of MU watches, Great Adventures offers a warranty against defect for one year. At the end of the year, the company estimates future warranty costs to be $6,200. No Date General Journal Debit Credit 1 Dec 31 Interest Expense 805 Interest Payable 805…
1. On January 1, 2023, Malone purchased a building with a $200,000 10 year zero interest note. The normal borrowing rate for Malone is 10%. (you will need to use TVM and an amortization table) A. Compute the present value and prepare an amortization table. B. Record the necessary journal entries at 1/1/23, 12/31/23 and 12/31/24 using the effective interest method. C. Show the financial statement presentation of the note on the I/S and B/S at 12/31/23 and 12/31/24. 2. On October 1, 2023, Malone borrowed $50,000 by issuing a 11 month, 9% note. Interest will be paid at maturity. (you do NOT need to use TVM or an amortization table) A. Record the journal entries at 10/1/23, 12/31/23 and maturity. B. Show the financial statement presentation of the note on the I/S and B/S at 12/31/23 and 12/31/24. 3. During 2023 Jones sells products that carry a three-year manufacturer’s warranty. Jones sold 2,000 units this year for $2,000 each. For this year’s sales, Jones estimates the warranty costs to…