M. A. Ivy Company reports the following in its 2016 annual report:
For 2015 and 2016, the Company incurred rent expense of $1,486 and $1,758 (in thousands), respectively.
A. Calculate the present value of operating lease payments using a discount rate of 4%.
B. M. A. Ivy Company's balance sheet reports total assets of $46,640,000 and total liabilities of $11,377,500. Calculate the change in the company's assets and liabilities with the operating leases being capitalized.
C. Assume that the leased equipment has a useful life of 12 years and no salvage value. Assume straight-line depreciation. Estimate the effect on net operating profit before tax in 2016, of capitalizing these operating leases.
D. Estimate the effect on interest expense of capitalizing these operating leases.

Question

M. A. Ivy Company reports the following in its 2016 annual report:
  For 2015 and 2016, the Company incurred rent expense of $1,486 and $1,758 (in thousands), respectively.
A. Calculate the present value of operating lease payments using a discount rate of 4%.
B. M. A. Ivy Company's balance sheet reports total assets of $46,640,000 and total liabilities of $11,377,500. Calculate the change in the company's assets and liabilities with the operating leases being capitalized.
C. Assume that the leased equipment has a useful life of 12 years and no salvage value. Assume straight-line depreciation. Estimate the effect on net operating profit before tax in 2016, of capitalizing these operating leases.
D. Estimate the effect on interest expense of capitalizing these operating leases.

Quizplus · Accepted Answer

The Answer of M. A. Ivy Company reports the following in its 2016 annual report:
  For 2015 and 2016, the Company incurred rent expense of $1,486 and $1,758 (in thousands), respectively.
A. Calculate the present value of operating lease payments using a discount rate of 4%.
B. M. A. Ivy Company's balance sheet reports total assets of $46,640,000 and total liabilities of $11,377,500. Calculate the change in the company's assets and liabilities with the operating leases being capitalized.
C. Assume that the leased equipment has a useful life of 12 years and no salvage value. Assume straight-line depreciation. Estimate the effect on net operating profit before tax in 2016, of capitalizing these operating leases.
D. Estimate the effect on interest expense of capitalizing these operating leases.

M A Ivy Ivy Company Reports the Following in Its 2016 Annual