Taunton Manufacturing Inc. is a machine shop in Taunton Massachusetts. The firm recently leased a drill press for a 20-year term at payments of $9,000 per year payable at year-end. No residual value was assumed in the lease, which is clearly a financing lease. Taunton can borrow at 8%, and will depreciate the press straight line over 20 years.
Shortly before the lease became effective Taunton's balance sheet was as follows:
Taunton Manufacturing Inc.
Balance Sheet
($000)
Current Assets $ 35 Current Liabilities $ 25
Fixed Assets 315 Long Term Debt 95
Total Assets $350 Equity 230
Total Debt & Equity $350
Answer the following questions working in whole dollars but present balance sheet accounts rounded to the nearest $1,000.
a. Construct Taunton's balance sheet showing the capitalized lease and the related lease obligation.