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Celestion,Inc. ,leased equipment to Speaker Company on January 1,2014.The lease is for a five-year period ending January 1,2019.The first equal annual payment of $1,200,000 was made on January 1,2014.The cash selling price of the equipment is $5,174,552,which is equal to the present value of the lease payments at 8%.Celestion purchased the equipment for $4,300,000.
-Celestion should account for this lease as
WACC
Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.
Book Value
The net value of a company's assets minus its liabilities, often used to assess a company's financial health.
Capital
Financial assets or the financial value of assets, such as cash, used by a company to fuel its business operations.
CAPM
The Capital Asset Pricing Model, a model that describes the relationship between systematic risk and expected return for assets, particularly stocks.
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