Alejandro Tech Co. leases equipment on January 1, Year One, for a term of five years. The lease agreement stipulates an annual payment of $5,000 for the first year and $12,000 per year for the remaining four years. The present value of these payments, calculated at a discount rate of 8%, is assumed to be $50,000. This lease is classified as an operating lease. How much lease expense will Alejandro Tech Co. recognize for Year One? a. $5,000 b. $9,400 c. $10,600 d. $11,600

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 5RE: Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the...
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Alejandro Tech Co. leases equipment on January 1, Year
One, for a term of five years. The lease agreement
stipulates an annual payment of $5,000 for the first year
and $12,000 per year for the remaining four years. The
present value of these payments, calculated at a
discount rate of 8%, is assumed to be $50,000. This lease
is classified as an operating lease. How much lease
expense will Alejandro Tech Co. recognize for Year One?
a. $5,000
b. $9,400
c. $10,600
d. $11,600
Transcribed Image Text:Alejandro Tech Co. leases equipment on January 1, Year One, for a term of five years. The lease agreement stipulates an annual payment of $5,000 for the first year and $12,000 per year for the remaining four years. The present value of these payments, calculated at a discount rate of 8%, is assumed to be $50,000. This lease is classified as an operating lease. How much lease expense will Alejandro Tech Co. recognize for Year One? a. $5,000 b. $9,400 c. $10,600 d. $11,600
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