25.
On January 1, 2009, Seaside Company leased equipment under a 5-year lease with payments of $3,000 on each December 31 of the lease term. The present value of the lease payments at a discount rate of 7% is $12,300. The lease is considered a capital lease. Calculate depreciation expense (straight-line with no salvage) and interest expense for 2009.
26.On January 1, 2010, Jackson Corporation issued a 4-year, 12%, $20,000 installment note payable. The payment on this note is $6,585 and is paid annually at year-end beginning December 31, 2010. Complete the following amortization schedule.
Date
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Cash
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Interest Expense
|
Amortization
|
Carrying Value
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Jan. 1, 2010
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|
|
|
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Dec. 31, 2010
|
|
|
|
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Dec. 31, 2011
|
|
|
|
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Dec. 31, 2012
|
|
|
|
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Dec. 31, 2013
|
|
|
|
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27.On January 1, 2009, Standard Incorporated is going to issue long-term debt in order to obtain money required to finance the purchase of equipment. It will have to pay a market rate of interest of 10% on this borrowed money. Standard is considering two different financial instruments in order to obtain $10,494. The first instrument being considered is a 3-year, 12%, $10,000 note with interest payable every December 31 over the life of the note. Alternatively, a 3-year, non-interest-bearing note with maturity value of $13,657 will be issued. Show how Standard's January 1, 2009 balance sheet and 2009 income statement will differ if Standard chooses to issue the non-interest-bearing note instead of the 10% note.