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# The lease payments from footnote disclosures of an operating lease

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Year Lease payments ($) 1. 1,375 2. 1,210 3. 825 Year 4 and after 4,125 Assume a discount rate of 8%. Required: a. Calculate the PV of all the lease payments. b. Assume a 10% discount rate and a tax rate of 25%, so that the PV of all the lease payments is$5,220. Complete the I/S figures .

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Complete Question

The lease payments from footnote disclosures of an operating lease Year Lease payments ($) 1. 2. 3. Year 4 and after 1,375 1,210 825 4,125 Assume a discount rate of 8%. Required: a. Calculate the Pv of all the lease payments. b. Assume a 10% discount rate and a tax rate of 25%, so that the Pv of all the lease payments is$5,220.

Complete the I/S figures Income Statement Effects

NO PAT            $1,500 - - INT(1-tax rate) 475 - - NI$1,025                                 -                                    -

Explanation:

from the question

from the question

present value of all lease payment

year                            lease payment

1                                    $1373 2$1210

3                                   $825 4 and after$4125

To get or derive the of the lease payment after year 4 i.e future lease payment

= =  present value of all lease payment

year                      lease payment                       present value at 8%

1                                      $1375$1273

2                                     $1210$1037

3                                      $835$654

4                                      $4125$3032

$51562.5$37899

Total                                                                              $43895 calculation for PV year 1 0.9259 × 1375 2 0.8573 × 1210 3 0.7938 × 835 4 0.7350 × 4125 after 0.7350 × 51562.5 As reported adjustment Adjusted NO PAT$1500                         $0$ 1500

INT ( 1-Tax rate)                      $475$392                    $867 NI$1025                          $0$  634

NO PAT                                                                         $1500 +$0
INT (1-TAX RATE]           5220×0.10×(1 -0.25)              $475 +$392
NI                                                                                   $1500 -$867 