Rhone-Metro Industries manufacturers equipment that is sold or leased.
On December 31, 2013,...
Business, 16.04.2020 00:44, werewolf4751
Rhone-Metro Industries manufacturers equipment that is sold or leased.
On December 31, 2013, Rhone-Metro Industries leased equipment to
Western Soya Co., for a four-year period ending December 31, 2017,
at which time possession of the leased asset will revert back to
Rhone-Metro The equipment cost Rhone Metro. The equipment cost Rhone-Metro $300 000 to Metro $300,000 to
manufacture and has an expected useful life of six years. Its normal
sales price is $365,760. The expected residual value of $25,000 at
December 31, 2017 is not guaranteed. Equal payments under the
lease are $104,000 (including $4,000 executory costs) and are due on
December 31 of each year. The first payment was made on December
31, 2013. Collectibility of the remaining lease payments is
reasonably assured and Rhone Metro has no material cost
reasonably assured, and Rhone-Metro has no material cost
uncertainties. Western Soya’s incremental borrowing rate is 12%.
Western Soya knows the interest rate implicit in the lease payments is
10%. Both companies use straight-line depreciation.
Show how Rhone-Metro calculated the $104,000 lease
payments.
Answers: 2
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