On the last day of its fiscal year ending December 31, 2016, the Boatright Ship

Question

On the last day of its fiscal year ending December 31, 2016, the Boatright Ship Builders leased two manufacturing facilities. Lease A requires 10 annual lease payments of $50,000 beginning on January 1, 2017. Lease B also is for 10 years with payments of $60,000 beginning January 1, 2018. Accounting standards require both teases to be recorded as liabilities for the present value of the scheduled payments. Assume that ar(8%)nterest rate properly reflects the time value of money for the lease obligations. Calculate the amount at which Boatright should record the lease liabilitiy for each lease, Lease A and Lease B. [10 points] To earn all points, show your work including the factor(s) used.

Explanation / Answer

Boatright Ship Builders Lease liability: Lease A: PVAD = $50,000 (7.24689*) = $362,345 = Liability *Present value of an annuity due of $1: n = 10, i = 8% Lease B: PVAD = $60,000 x 5.62288* = $337,373 *Present value of an annuity due of $1: n = 7, i = 8% PV = $337,373 x .79383** = $267,817 **Present value of $1: n = 3, i = 8% The company's balance sheet would include a liability for leases of $630,162 ($362,345 + 267,817).

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.