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4. On January 1, Sepe Vineyard Supply leased a truck for a five-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $11,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. The lessee interest rate is 5% and the truck economic life is 7 years. What amount, if any, should be recorded as the right-of-use asset (leased asset-truck) and lease liability at the inception under this rental agreement? A) 0 B) $3,000 C) present value of $3,000 D) present value of $11,000

4. On January 1, Sepe Vineyard Supply leased a truck for a five-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $11,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. The lessee interest rate is 5% and the truck economic life is 7 years. What amount, if any, should be recorded as the right-of-use asset (leased asset-truck) and lease liability at the inception under this rental agreement? A) 0 B) $3,000 C) present value of $3,000 D) present value of $11,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4. On January 1, Sepe Vineyard Supply leased a truck for a five-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $11,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. The lessee interest rate is 5% and the truck economic life is 7 years. What amount, if any, should be recorded as the right-of-use asset (leased asset-truck) and lease liability at the inception under this rental agreement? A) 0 B) $3,000 C) present value of $3,000 D) present value of $11,000
Transcribed Image Text:4. On January 1, Sepe Vineyard Supply leased a truck for a five-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $11,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. The lessee interest rate is 5% and the truck economic life is 7 years. What amount, if any, should be recorded as the right-of-use asset (leased asset-truck) and lease liability at the inception under this rental agreement? A) 0 B) $3,000 C) present value of $3,000 D) present value of $11,000
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