Answered: Assuming the first payment is made on…

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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Question

On December 31, 2021, Carla Vista Corporation leased a plane from Bell Company for an 7-year period expiring December 31, 2028. Equal annual payments of $445000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Carla Vista’s books. The present value at December 31, 2021 of the 8 lease payments over the lease term discounted at 10% is $2611446. Assuming the first payment is made on time, the amount that should be reported by Carla Vista Corporation as the lease liability on its December 31, 2021 balance sheet is

$2427591.

$2383091.

$2166446.

$2611446.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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