Haystack, Inc

question 77

Short Answer

Haystack, Inc.manufactures machinery used in the mining industry.On January 2, 2016 it leased equipment with a cost of $200,000 to Silver Point Co.The 5-year lease calls for a 10% down payment and equal annual payments of $73,259 at the end of each year.The equipment has an expected useful life of 5 years.Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double-declining balance method.The selling price of the equipment is $325,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co.What is the book value of the leased asset at December 31, 2016, and what is the balance in the Lease Liability account?

---

Definitions:

Pleasurable

Causing a feeling of satisfaction, enjoyment, or pleasure.

Piaget

A Swiss psychologist known for his pioneering work in developmental psychology and his theory of cognitive development in children.

Tertiary Circular Reaction

A stage in Piaget's theory of cognitive development where infants explore their environment and learn through trial and error with repeated actions.

Object Permanence

The understanding that objects continue to exist even when they cannot be seen, heard, or touched, typically developed during infancy.