Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on december 31, 2019, central perk corporation sig

On December 31, 2019, Central Perk Corporation signed a non-cancelable lease for a coffee machine....

80.2K

Verified Solution

Question

Accounting

On December 31, 2019, Central Perk Corporation signed a non-cancelable lease for a coffee machine. The terms of the lease called for Central Perk to make 8 annual payments of $10,000 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 10 years. The machine reverts back to the lessor at the end of the lease term. Central Perk uses the straight-line method of depreciation for all of its plant assets. Central Perk's incremental borrowing rate is 4%, and the lessor's implicit rate is unknown.

Instructions

a. What type of lease is this?

b. Compute the present value of the lease payments. (Round to nearest dollar)

c. Prepare all necessary journal entries for Central Perk Corporation for this lease through December 31, 2020.

PV of an Annuity Due of $1

i = 2%

i = 4%

i = 8%

N = 4

3.88388

3.77509

3.57710

N = 8

7.47199

7.00205

6.20637

N = 16

13.84926

12.11839

9.55948

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students