What is the value that will be entered on both sides of Atlas Asbestos Ltd.'s balance sheet if the company's capital leasing contract calls for quarterly payments of $3,535 for five years beginning three months from now at an interest rate of 12% compounded four times year?

Question

Quizplus · Accepted Answer

To find the value that will be entered on both sides of the balance sheet, we need to calculate the present value of the lease payments.

Using the formula for the present value of an annuity:

PV = PMT x [(1 - (1 / (1 + r)^n)) / r]

where PV is the present value, PMT is the payment, r is the interest rate per period, and n is the total number of periods.

Plugging in the given values:

PV = $3,535 x [(1 - (1 / (1 + 0.12/4)^(5*4)))) / (0.12/4)]

PV = $52,591.63

Therefore, the value that will be entered on both sides of the balance sheet is $52,591.63. Rounded to the nearest dollar, the answer is A) $52,592.

What Is the Value That Will Be Entered on Both