1. Cherry hill Inc.s balance sheet is shown below: Assets US$ liabilities...
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Accounting
1. Cherry hill Inc.s balance sheet is shown below:
| Assets | US$ | liabilities and equity | US$ |
| Assets | 50000 | Equity | 50000 |
| Total | 50000 | Total | 50000 |
Cherry hill wishes to acquire equipment worth US$20,000. It can either buy it by borrowing the required amount at a 10% rate of interest or it can take it on lease for a period of 5 years. If it leases it, the lease rental would be US$5276 per year. Assume taxes are absent. Show the balance sheet of Cherry hill Inc. if: (a) It finances the equipment with debt (b) It leases the equipment as an operating lease (c) It leases the equipment as a financial lease (hint: find the present value of lease rentals at a discount rate of 10%)
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