Facts for Question 6 Tower Company leased equipment to Pisa, Inc.  under an 8-year lease requiring equal annual payments on January 1 of each year, with the first payment due at lease inception, which was 1/1/2024. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 10-year useful life and is expected to have residual value of $400,000 at the end of the lease. None of the residual value is guaranteed by Pisa.  The fair market value of the equipment on 1/1/2024 is $2,000,000. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease is 8%.  Present value factors are below.   PV Annuity Due PV Ordinary Annuity PV of Single Sum 8%, 8 periods 6.20637 5.74664 0.540269 10%, 8 periods 5.86842 5.33493 0.466507 What is the amount of the lease payment?

Facts for Questions 23 to 29 Tower Company leased equipment to Pisa, Inc.  under an 8-year lease requiring equal annual payments of $265,667 on January 1 of each year, with the first payment due at lease inception, which was 1/1/2024. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 10-year useful life and is expected to have residual value of $650,000 at the end of the lease. All of the residual value is guaranteed by Pisa.  The equipment was carried in Tower’s accounting records at a cost of $1,600,000. The fair market value of the equipment on 1/1/2024 is $2,000,000. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%.  Present value factors are below.   PV Annuity Due PV Ordinary Annuity PV of Single Sum 8%, 8 periods 6.20637 5.74664 0.540269 10%, 8 periods 5.86842 5.33493 0.466507   Use these facts to answer questions 23 to 29:

Provide brief (i.e., 1 or 2 sentence) answers to questions 1 to 5.

What amount of lease revenue will Tower recognize for the 12 months ended 12/31/2024? If no lease revenue recognized, enter $0.

What amount of sales revenue will Tower recognize on the transaction? If no sales revenue recognized, enter $0.

Facts for Questions 16 to 22 Tower Company leased equipment to Pisa, Inc.  under an 8-year lease requiring equal annual payments of $265,667 on January 1 of each year, with the first payment due at lease inception, which was 1/1/2024. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 10-year useful life and is expected to have residual value of $650,000 at the end of the lease. None of the residual value is guaranteed by Pisa.  The equipment was carried in Tower’s accounting records at a cost of $1,600,000. The fair market value of the equipment on 1/1/2024 is $2,000,000. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%.  Present value factors are below.   PV Annuity Due PV Ordinary Annuity PV of Single Sum 8%, 8 periods 6.20637 5.74664 0.540269 10%, 8 periods 5.86842 5.33493 0.466507   Use these facts to answer questions 16 to 22:

Explain how the lessee measures the lease liability and the related right-of-use asset at the beginning of the lease. Identify the way in which this measurement differs from the amount used in the “present value test.”

Facts for Question 7 On January 1, 2025, Metalcraft leases a machine from Capital Leasing for 10 years with an annual lease payment of $15,000. The first payment is due on January 1, 2025. The rate implicit in the lease (which is known to Metalcraft) is 10%.  The lease contract allows Metalcraft to terminate the lease after three years by paying an early termination penalty of $45,000. At the start of the lease, it is reasonably certain that Metalcraft will terminate the lease at the end of three years. The residual value of the machine at the end of the 10 year lease is estimated to be $5,000 and none is guaranteed by Metalcraft. Present value factors follow   PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 3 periods 2.73554 2.48685 0.751315 10%, 10 periods 6.75902 6.14457 0.385543 What amount will Metalcraft recognize as a right-of-use asset at lease inception?

Darren works as a software engineer at a Fortune 500 company. He has been asked to help reduce risk when deploying new versions of the company’s software through software analysis tools. He has been asked to implement one of these analyses, running to verify any programs committed to source control, on the condition that it will not produce any false alarms. Should he use a sound analysis, a complete analysis, or is either equally applicable?

The following are fictitious headlines about the pecan market. In each case, decide if the information will cause a change in the current market sup­ply for U.S. pecans sold worldwide. If so, decide if it is an increase or a decrease. Assume that the supply at the beginning of the activity is at Curve 3.  The result of your answer is the new “starting point” for the next question.