The GAP Inc. discloses the following schedule to its fiscal 2018 (ended February 2, 2019) 10-K/report relating to its leasing to its leasing activities The aggregate minimum noncancelable annual lease payments under leases in effect on February 2, 2019, are as follows: Fiscal Year ($ millions) 2019 2020 2021 2022 2023 Thereafter 1,520 Total minimum lease commitments $5,935 $1,156 1,098 892 730 539 Compute the present value of GAP's operating leases using a 6% discount rate and round the remaining lease term to the nearest whole year. Round each answer to the nearest whole number. S million Present Value Year 1 $ 1.091 Year 2 977 ✓
Q: Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Tram-Ropes Limited…
A: The objective of the question is to calculate the total market value of the firm's capital structure…
Q: A beauty product company is developing a new fragrance named Happy Forever. There is a probability…
A: Expected annual sales = Sum of (Probability * Sales) in all scenarios
Q: What would you be willing to pay (now) for the following yearend cash flows if your required return…
A: The concept of time value of money will be used here. As per the concept of time value of money the…
Q: Assume that your company is an EBIT is currently $10,000,000, and EBIT is expected to remain…
A: Repurchase is the purchase of own shares in the market by issue of debt and this way increase value…
Q: Pisa Pizza, a seller f frozen pizza, is considering introducing a healthier version of its pizza…
A: Sales of new Pizza = $ 15 million per year39 % of customers were switch customers
Q: A university's college of engineering would like to determine how much it will cost to keep its…
A: The worth of the cash flow or the stream of the cash flows to be received in the future as of today…
Q: Which financial statement would you use to determine how much cash a business has available to buy…
A: I'm unable to provide real-time screenshots with actual financial statements due to the limitations…
Q: Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: ANB has a project with $185211 in depreciation expense each year, no changes in net working capital…
A: NPV is the most used method of capital budgeting based on the time value of money and it must be…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Please mention What to find in this question The standard deviation is a statistical metric that…
Q: All American Telephones Inc. is considering the production of a new cell phone. The project will…
A: Making decisions about capital budgeting entails assessing and choosing capital expenditures or…
Q: c. What are the cash-flow effects to Tyra in the year she receives the restricted stock, in the year…
A: When an investment is sold and we get a profit/ gain from that sale if the period of purchasing and…
Q: 1. Calculate the annual income tax expense for each of years 1 through 5 arising from this…
A: Net present value is determined by deducting the initial investment from the current value of cash…
Q: A certain convertible bond has a conversion ratio of 30 and a conversion premium of 15%. The current…
A: Given Values:Conversion ratio is 30Conversion premium is 15%Current market price is $30The…
Q: A factoring company discounts a client a document with a maturity value of 40,000 at a discount rate…
A: In this question, we are required to determine the profit obtained by the factoring company.
Q: x-month call options with strike prices of $34.9 and $52.3 cost $9.6 and $3.4, respectively. What is…
A: In bull call spread , there is simultaneous buy and sell of call option with different strike prices…
Q: Fill in the missing values in the table. (Round answers to 2 decimal places, e.g. 1.55. Do not leave…
A: The statistical variables that highlight the value of uncertainties linked to an investment are the…
Q: You have a portfolio with a standard deviation of 20% and an expected return of 15%. You are…
A: The risk associated with the portfolio refers to the uncertainties resulting due to price…
Q: The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan.…
A: Initial investment = $225,000Income before depreciation & tax = $70,000Tax rate = 25%Working…
Q: Two alternatives can be used to solve a repeatedly valve failure problem. A) Use new valves from…
A: By calculating the present value of an investment's predicted cash flows less the original cost of…
Q: The fee banks pay to the FDIC for deposit insurance is now: a fixed dollar amount for all banks. O a…
A: In this question, we are required to determine the mode of computation of fees paid by banks to…
Q: 4. Weight of an apple in a box of apples is an example of a Odiscrete continuous variable.
A: Because they can take any value within a given range, continuous variables allow very precise…
Q: Bennett Company has a potential new project that is expected to generate annual revenues of…
A: Operating Cash flow is the amount which is earned by the investor from the project. It is the net…
Q: Suppose you make a 2-year investment of $100,000 and it grows by 100% to $200,000 during the first…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: Athena Investment Company is considering the purchase of an office property. After a careful review…
A: The difference between the current value of cash inflows and outflow of cash over a period of time…
Q: The Carter Corporation, a firm in the 25% marginal tax bracket, with a 15% required rate of return…
A: Payback period: The time taken to recover the initial investment.NPV (Net Present Value): The…
Q: K Annika bought euro denominated bonds when the exchange rate was 909 euro to the dollar. She paid…
A: The holding period return can be found by using the following mathematical expression:Where:P0 is…
Q: Armor Investment Company is considering the acquisition of a heavily depreciated building on 10…
A: Given:The building gets depreciated on 10 acres of land.The cash flow is $102,200.The rate of…
Q: You are given the following information about a portfolio you are to manage. For the long term, you…
A: Expected Drop in Index= (4250-4500)/4500= -5.56%
Q: As an active fund manager, you have obtained information on three individual stocks, the market…
A: Weighted average = expected return / standard deviation.Stock 1=20/80∗100.=25%.Stock…
Q: Exercise 14-10 (Algo) Net Present Value Analysis [LO14-2] Kathy Myers frequently purchases stocks…
A: Share of stock = $17,000Cash dividend received for 3 years = $701Stock sold at the end of 3rd year…
Q: Can UK CEO ownership and board structure explain a firm’s leverage level? explain the mm theory,…
A: Several factors, such as CEO ownership and board composition, can impact a company's financial…
Q: You observe the yields of the following Treasury securities (all yields are shown on a…
A: In the realm of finance, a profound comprehension of spot rates is indispensable for bond pricing…
Q: esla is planning to produce an all-electric family car and expects the following cash flows (in $…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at…
A: > Cost of equity, r = D0 x (1 + g) / P + g>Where,>P = Stock value>D0 = Current…
Q: Rick is a part-time business teacher at Sheridan High School. He spends $250 on qualified expenses…
A: The objective of this question is to determine the amount that Rick can deduct as an adjustment to…
Q: Use the following cash flow data to calculate the project's MIRR: WACC: Year Cash flows Select one:…
A: > Given :.> WACC = 10%> Tax rate = 35%
Q: Pertinent information for two alternatives A and B is shown below. If i=10% / year and the effective…
A: Cash flows after tax (CFAT) measures the ability to generate profit from operations. Cash flows…
Q: a) Share X and Share Y have the following returns with their respective probabilities. Share X Share…
A: Expected return can be found by multiplying the expected returns with the probabilities and then the…
Q: A 5-year Treasury bond has a 5.2% yield. A 10-year Treasury bond yields 7.0%, and a 10-year…
A: Corporate Bond:It represents a debt instrument issued by a company for the purpose of raising…
Q: Stock Split Fauver Enterprises declared a 4-for-1 stock split last year, and this year its dividend…
A: In this question, we are required to determine last year's dividend.
Q: You are a portfolio manager, currently managing $100 million worth asset including stock and bonds.…
A: The derivative market is a financial market where financial instruments known as derivatives are…
Q: Fill in the missing values in the table. (Round answers to 2 decimal places, e.g. 1.55. Do not leave…
A: An indication of the systematic risk for an investment or the risk factor that influences the whole…
Q: One can use Black-Scholes model to price any financial derivatives. true or false
A: The Black-Scholes model was specifically designed to value European-style options on non-dividend…
Q: Steve recently graduated with his Masters degree, and landed a great job. He decided that he wants…
A: Here,InvestmentAmount today is $2,000Monthly Deposits is $150Interest Rate is 6%Compounding…
Q: 1. Construct a partial mortage schedule for Problem 9, showing the first teo payments, last two…
A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount…
Q: eff & Bezos is a fresh groceries delivery company. They have access to borrowing unds at a pre-tax…
A: Lease is type of finance of equipments and in this the equipments can be used by payment of the…
Q: Suppose Fried Fritters Ltd. pays a corporate tax rate of 30% and is financed as follows: • 30%…
A: WACC needs to be found in this case as the required return rate at which NPV is to be computed is…
Q: Molin Inc. is considering to a project that will have the following series of cash flow from assets…
A: Cash flow for Year 0 = cf0 = -1580.92Cash flow for Year 1 = cf1 = 453Cash flow for Year 2 = cf2 =…
Q: A bank offers loans at a rate of 19% per year, compounded quarterly. How much is the effective…
A: Compound = n = Quarterly = 4Interest Rate = r = 19%
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. Assume that Garvey is required to make payments on December 31 each year.Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)
- Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).TOPIC: LEASESCompute for the following (show solution):a. Manufacturer's profit recognized in the year 2020.b. Total financial revenue pertaining to the lease.c. Interest Revenue recognized in the year 2020.d. Net Finance lease Receivable balance, December 31, 2020.Analyzing and Interpreting Lease Footnote Disclosures The GAP Inc. discloses the following schedule to its fiscal 2018 (ended February 2, 2019) 10-K report relating to its leasing to its leasing activities. The aggregate minimum noncancelable annual lease payments under leases in effect on February 2, 2019, are as follows: Fiscal Year ($ millions) 2019 $1,156 2020 1,098 2021 892 2022 730 2023 539 Thereafter 1,520 Total minimum lease commitments $5,935 Compute the present value of GAP's operating leases using a 6% discount rate and round the remaining lease term to the nearest whole year. Round each answer to the nearest whole number. $ million Present Value Year 1 $ 1,091 Year 2 977 Year 3 749✓ Year 4 578 ✓ Year 5 403 After 5 1,135 x $ 4,904 x
- Reyes Corp. disclosed the following lease information in its 2019 annual report related to its leasing activities (in millions). Capital Leases Operating leases 2020 $ 307 $ 2,471 2021 286 2,302 2022 262 1,202 2023 251 980 116 830 2024 696 9,130 Thereafter 1,918 $16,915 Total $ 1,316.1 Present value of net minimum lease paymentsThe GAP Inc. discloses the following schedule to its fiscal 2018 (ended February 2, 2019) 10-K report relating to its leasing to its leasing activities. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. The aggregate minimum noncancelable annual lease payments under leases in effect on February 2, 2019, are as follows: Fiscal Year ($ millions) 2019 $1,098 2020 1,043 2021 847 2022 694 2023 512 Thereafter Total minimum lease commitments $5,638 1,444 Compute the present value of GAP's operating leases using the following assumptions Assmption Discount rate Round remaining lease term to the nearest whole year Year Present Value 1 $ 0 2 0 3 0 4 0 5 0 >5 0 $ 0 6%Applying New Lease Accounting Standards for Operating Leases On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. Details of lease contract Leased asset Office space Lease term 5 years Annual lease payment $115,487 Upfront fees $10,000 Cost of debt capital 5% a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. Amount of lease liability b. What amount will be added to the balance sheet as an asset? Amount added as an asset The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!!