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ACCT 4130DUE 11:59pm FEBRUARY 6 Excel Project Spring 2019 Khaleesi Corporation (“Khaleesi”) leases dragonglass weapons to customers. She gains a loyal following of customers because dragonglass is of limited supply but high demand due to its usefulness for the upcoming winter. Further, Khaleesi tends to offer more favorable financing terms than competitors offering substitutive products (e.g., Lannister, LLC). Khaleesi was recently approached by the Lords of the North, Inc. (“the North”) which is interested in leasing a substantial stock of weapons over a potentially lengthy period of time. The North has indicated a willingness to pay any rate that Khaleesi Corporation demands for its dragonglass products, but generally receives an interest rate of 12% on all other borrowing transactions. The North’s management are a very noble group, so payments are reasonably assured. Further, there are no material cost uncertainties. Khaleesi has gathered its council to discuss entering into such a contract with the North and has invited you to provide financial council. Khaleesi’s board has proposed several alternative sets of lease terms (below) and would like you determine what the North’s annual payments will be under each scenario, if payments are made at the beginning of the period. A B C Fair value of weapons to be leased $489,450 $489,450 $489,450 Lease Term 11 years 11 years 11 years Useful Life of leased assets 13 years 13 years 13 years Lessee/Lessor interest rate 6% 6% 8% Residual Value (guaranteed) $0 $24,350 $24,350 Food for thought: What happens to the payment when the lease term includes a guaranteed residual value? Food for thought: What happens to the payment when the rate of return increases? REQUIRED: 1. On the first tab of your Excel workbook, prepare a schedule for Khaleesi which uses Excel to compute the North’s necessary annual payment under each of the scenarios listed in the chart above. The schedule should list for each scenario above the desired present value of lease payments, future value of the leased asset, the lease term, and the interest rate and utilize an Excel formula to compute a payment (Hint: =PMT). Khaleesi is a high paying client of your firm, so the schedule should be extremely organized and professional looking (e,g., include a title, date, description in the top left-hand corner and utilize borders, font effects, etc. in cells to make the worksheet look visually appealing). (Note: You must use only Excel to prepare and present all parts of this table. Do not use a hand-held calculator, and do not use the compound interest tables to solve any part of this problem. Points will be deducted if Excel formulas are not used for each necessary computation.) For the requirements below, assume Khaleesi Corporation chooses lease option B and enters into an agreement with the North on 1/1/18. The North should return the weapons on 12/31/2028. 2. On the second tab of the Excel workbook, prepare a lease amortization schedule describing the pattern of payments and interest over the lease term for both Khaleesi and the North. (Note: You must use only Excel to prepare and present all parts of this table. Do not use a hand-held calculator, and do not use the compound interest tables to solve any part of this problem.) 3. On the third tab of the Excel workbook, prepare the appropriate entries for both Khaleesi and the North on 1/1/18. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas. In other words, do not “hard-key” the numbers for your debits and credits. Instead, type “=” into the cell and then click the number from the second tab of the workbook. 4. On the fourth tab of the Excel workbook, prepare the appropriate entries for both Khaleesi and the North through 1/1/21. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas. 5. On the fifth tab, prepare the appropriate entries for both Khaleesi and the North on 12/31/2028. Assume the weapons returned to Khaleesi have an actual residual value of $500 (remember, Khaleesi guaranteed a residual value of $24,350). DELIVERABLES: This assignment is due by 11:59pm on February 6. This assignment is worth a total of 20 points toward your final grade. Of those 20 points, up to 10 may be earned through the required/proper use of Excel (i.e,. formulas used in every instance indicated in the instructions), 5 points and for the appropriate level of professional style, and 5 points are awarded for obtaining the correct numbers.