On January 2, 2017 Nash Company leases a machine with a fairvalue of $34,000...

70.2K

Verified Solution

Question

Accounting

On January 2, 2017 Nash Company leases a machine with a fairvalue of $34,000 from Snead, Inc., on the following terms:
1. Noncancelable term of 4 years.
2. Rental of $8,400 per year (at beginning of each year).
3. Estimated residual value after 4 years is $4,200. Nash Companyguarantees the residual value of $4,200.
4. Estimated economic life of the machine is 5 years.
5. Nash Company’s incremental borrowing rate is 8% a year. Snead’simplicit rate is unknown.
Instructions:
What is the present value of the minimum lease payments?
Record the lease and first lease payment on Nash Company’s booksat the date of inception.
Record the first year’s depreciation on Nash Company’s books(assume straight-line).
Record the interest payable on Nash’s books at December 31,2017.

Answer & Explanation Solved by verified expert

4.2 Ratings (785 Votes)

Nash Company leases a machine with a fair value of 34000 Noncancelable term of 4 years Rental of 8400 per year at beginning of each year Estimated residual value after 4 years is 4200 Nash Company guarantees the residual value of 4200 Estimated See Answer

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

Transcribed Image Text

In: AccountingOn January 2, 2017 Nash Company leases a machine with a fairvalue of $34,000 from...On January 2, 2017 Nash Company leases a machine with a fairvalue of $34,000 from Snead, Inc., on the following terms:1.Noncancelable term of 4 years.2.Rental of $8,400 per year (at beginning of each year).3.Estimated residual value after 4 years is $4,200. Nash Companyguarantees the residual value of $4,200.4.Estimated economic life of the machine is 5 years.5.Nash Company’s incremental borrowing rate is 8% a year. Snead’simplicit rate is unknown.Instructions:What is the present value of the minimum lease payments?Record the lease and first lease payment on Nash Company’s booksat the date of inception.Record the first year’s depreciation on Nash Company’s books(assume straight-line).Record the interest payable on Nash’s books at December 31,2017.

1.		Noncancelable term of 4 years.
2.		Rental of $8,400 per year (at beginning of each year).
3.		Estimated residual value after 4 years is $4,200. Nash Companyguarantees the residual value of $4,200.
4.		Estimated economic life of the machine is 5 years.
5.		Nash Company’s incremental borrowing rate is 8% a year. Snead’simplicit rate is unknown.