58. On January 1, 2019, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day’s January 1, 2019 balance sheet, the principal amount of the lease obligations was a. 63,374 b. 61,446 c. 58,112 d. 56,502
58. On January 1, 2019, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day’s January 1, 2019 balance sheet, the principal amount of the lease obligations was a. 63,374 b. 61,446 c. 58,112 d. 56,502
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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58. On January 1, 2019, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day’s January 1, 2019
a. 63,374 b. 61,446 c. 58,112 d. 56,502
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