CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years beginning on 1 January 20X0. The lease requires four annual payments of €28,679 starting on 1 January 20X0. The useful life of the machine is four years, and its salvage value is zero. CAPBS follows US GAAP and accounts for the lease as a finance lease. The fair value of the machine is €100,000. The present value of the lease payments using the company's discount rate of 10 percent is €100,000. The company uses straight-line depreciation. What is the amount of the lease liability reported on the balance sheet on 31 December 20X0? What interest expense is reported in fiscal year 20X1? If CAPBS had determined that the above lease was an operating lease, what amount of expenses would be reported on the income statements in fiscal 20X0 and 20X1? How does this expense compare to the expenses reported under a finance lease?
CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years beginning on 1 January 20X0. The lease requires four annual payments of €28,679 starting on 1 January 20X0. The useful life of the machine is four years, and its salvage value is zero. CAPBS follows US GAAP and accounts for the lease as a finance lease. The fair value of the machine is €100,000. The present value of the lease payments using the company's discount rate of 10 percent is €100,000. The company uses straight-line
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What is the amount of the lease liability reported on the
balance sheet on 31 December 20X0? What interest expense is reported in fiscal year 20X1? -
If CAPBS had determined that the above lease was an operating lease, what amount of expenses would be reported on the income statements in fiscal 20X0 and 20X1? How does this expense compare to the expenses reported under a finance lease?
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