NutraLabs, Inc., leased a protein analyzer to Werner Chemical, Inc., on Septembe

Question

NutraLabs, Inc., leased a protein analyzer to Werner Chemical, Inc., on September 30, 2018. NutraLabs manufactured the machine at a cost of $5.25 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $424,177, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2018. NutraLabs' implicit interest rate is 16%. (FV of $1, PV of $1, EVA of $t, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price at which NutraLabs is "selling" the equipment (present value of the lease payments) at September 30, 2018. 2. What pretax amounts related to the lease would NutraLabs report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Nutralabs report in its income statement for the year ended December 31, 2018 4. What pretax amounts related to the lease would NutraLabs report in its statement of cash flows for the year ended December 31, 2018? Complete this question by entering your answers in the tabs below Req 1 to 3 Req 4 Determine the price at which NutraLabs is "selling" the equipment (present value of the lease payments) at September 30, 2018 What pretax amounts related to the lease would NutraLabs report in its balance sheet at December 31, 2018? What pretax amounts related to the lease would NutraLabs report in its income statement for the year ended December 31, 2018? (Round your intermediate and final answers to nearest whole dollar.) Show less 1. Present value 2. Net receivable 3. Income effect

Explanation / Answer

1. Calculation of Present value of Lease Payments

1.Annual Lease Payment

4,24,177

2.Present Value Interest Factor of Annuity Due (4%,20)

14.133939

3.Present Value of Annuity Due (1*2)

59,95,292

2. . What pre-tax amounts related to the lease would NutraLabs report in its balance sheet at December 31, 2018?

1.Present Value of Annuity Due

59,95,292

2.Less Adjustment for September 30, 2018

4,24,177

3.Adjustment for December 31, 2018 (424177 - ((5995292 - 424177)*16%/4)

2,01,332

4.Amount to be Reported in Balance Sheet as Lease Receivable at December 31, 2018

5369783

3. What pre-tax amounts related to the lease would Nutra Labs report in its income statement for the year ended December 31, 2018?

In The Income statement recognize the interest portion accrued during the Year as the Income of the Nutra Labs

Therefore 424177-201332=222845

Or

Alternative Calculations

(5995292 - 424177)*16%/4)=222845

Part C)

4. The total amount reported in the cash flow statement is determined as below:

Capital Lease

$5995292

Significant Non Cash Investing Activity

Interest Portion

$222845

Cash Inflows from Operating Activities

Principal Portion (424177*2 - 222845)

$625509

Cash Inflows from Investing Activities

1.Annual Lease Payment

4,24,177

2.Present Value Interest Factor of Annuity Due (4%,20)

14.133939

3.Present Value of Annuity Due (1*2)

59,95,292

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