<span> The </span>income statement<span> reports revenues and expenses and the resulting </span>net income
Question:
Graded assignment(towards 15% Hw grade) Saved Help Save& Exit Submit Check my work Your landscaping company can lease a truck for $7,800 a year (paid at year-end) for 6 years. It can instead buy the truck for $38,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%. 10 points
What is the present value of the cost of leasing?
Answer:
Cost of lease = $37,179.01
Explanation:
Leasing is a finance arrangement where one party (the lessor) transfers the right to use an asset to another party (the leasse) in exchange for a rent.
The cost of a lease to the leasee is the present value of the future lease payment discounted at the cost of capital.
So using the present value of annuity formula, we can work out the cost of the lease arrangement as follow:
PV =A× (1- 1+r)^(-n)/r
PV- Present Value
r- interest rate
n- number of years
A- annual lease payment
PV -
A-7,800
r-7%
n-6
PV = 7,800× (1- (1.07)^(-6)/0.07 = 37,179.01
Present Value = $37,179.01
Cost of lease = $37,179.01
Answer:
a. 4.91
b. 2.50 days
Explanation:
a. Inventory turnover
= Cost of goods sold / Average inventory
Average inventory =( Ending inventory + Opening inventory) / 2
= (4,676,000 + 4,190,000) / 2
= $4,433,000
Inventory turnover = 21,766,030 / $4,433,000
= 4.91
b. Days' sales in average receivables
= Average Account Receivables / Average daily sales
Average account receivables = (Ending receivables + Opening receivables) / 2
= (100,800 + 378,500) / 2
= $239,650
Average daily Sales = Sales / 365
= 34,988,900 / 365
= $95,860
Days' sales in average receivables = 239,650 / 95,860
= 2.50 days
