Marvin Corporation signed a five-year lease agreement on January 1, 20X3 in a transaction properly classified as a capital lease. The present value of the $125,000 minimum lease payments discounted at 10 percent at the date of signing was $600,000. Marvin owed $125,000 at the date of signing and five installments of $125,000 due on December 31 of each year, starting on December 31, 20X3. What should Marvin record as the current maturity on the lease at December 31, 20X4?
The correct answer is B�
I have a stupid question�in the question- it says Marvin owed $125,000 at the date of signing. So do we deduct 125,000 from the 600,000 immediately? Or not?
And the stem of the question is asking what should Marvin record as the current maturity on the lease at December 31, 20X4? Does it mean current liability on the lease? ( wordings is killing me on it) .Thanks for reading it.
| Posted: 21 Apr 2010 at 12:01 | IP Logged |
You are right, its asking current liability on lease
475,000 ----->lease obligation as on 01-01-03)
(125,000)--->Interest 47,5000 & current lease liability 77,500
397,500 --->lease obligation on 12-31-03
(125,000)--->Interest 39,750 & current lease liability 85,250
312,250 ---->lease obligation on 12-31-04
(125,000)--->Interest 31,250 & current lease liability 93,750
| Posted: 21 Apr 2010 at 12:23 | IP Logged |
Hi Gottatobe CPA,
By the way, did u take the FAR yet? becuase from ur signature , u took on 04/16. How was it? Any advice ? Thanks! I am taking it on May 31 and I am doing the review now. So would appreciate any tips or advices.
| Posted: 21 Apr 2010 at 12:38 | IP Logged |
Yes Venchlu, I have already taken the exam and I think I did allright. Will know for sure when I get the results. I see you have already passed REG and BEC and would agree with me that doing lots of simulations help clear the concepts better and also deal with those kind of questions.
From my experience i think FAR is not a tough exam if you r prepared well .
All the best with studying, I m sure u will do great like other two. :)
| Posted: 21 Apr 2010 at 12:54 | IP Logged |
Thanks. so u think practice more simulations will actually help answer simulations?
From my experience of REG, the simulations I got is nothing close to what I prepared. so I just feel such a waste of time preparing simulations. But i managed to pass anyway. . (Well, i also know that some concepts we know/understand will be tested on simulations for sure. ). At this point, only thing i can do is to put my head straight of review and practice for more MCQs and simulations.
One more thing- do u use becker ? do u think becker covers enough? Just curious. THanks again.