14 Oct company is purchasing
A company is purchasing a vehicle for 28,200 in cash or leasing it for 6,100 per year, payable at the end of each year. The useful life of the vehicle is 6 years and will be depreciated on a straight-line basis with no salvage. The annual interest rate is 8%.
1. Assume they purchased the vehicle and signed a 6 year, 8% note payable for 28,200 in satisfaction of the purchase price. Show the horizontal model.
2. Assume they leased the vehicle. Show the horizontal model for the capital lease transaction. Round up to the nearest $1.
3. Show the horizontal model for the end of the year to record the first annual lease payment of 6,100, do not round your answer. (based on #2 determine the appropriate amounts for interest and principal)
4. What expenses (include amounts) should the company recognize on the income statement for the first year of the lease?
5. How much would the annual payments be for the note payable signed in #1.
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