A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2.
Transcribed Image Text:A lease agreement that qualifies
as a finance lease calls for annual
lease payments of $50,000 over a
four-year lease term (also the
asset's useful life), with the first
payment on January 1, the
beginning of the lease. The
interest rate is 8%.
Required:
a. Determine the present value of
the lease upon the lease's
inception.
b. Create a partial amortization
table through the second
payment on January 1, Year 2.
c. If the lessee's fiscal year is the
calendar year, what would be the
amounts related to the lease that
the lessee would report in its
income statement for the first year
ended December 31 (ignore
taxes)?
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