December 31, 2021, Rafferty Company leased equipment under a finance lease. Annual lease payments of P200,000 are due December 31 for 10 years. The useful life of the equipment is 10 years, and the interest rate implicit in the lease is 10%. The finance lease obligation was recorded onDecember 31, 2021, at P1,350,000, and the first lease payment was made on that date. Question: What amount should be includedc in current liabilities on December 31, 2021 in relation to the lease? A. 65,000 B. 85,000 C. 115,000 D. 200,000

December 31, 2021, Rafferty Company leased equipment under a finance lease. Annual lease payments of P200,000 are due December 31 for 10 years. The useful life of the equipment is 10 years, and the interest rate implicit in the lease is 10%. The finance lease obligation was recorded onDecember 31, 2021, at P1,350,000, and the first lease payment was made on that date. Question: What amount should be includedc in current liabilities on December 31, 2021 in relation to the lease? A. 65,000 B. 85,000 C. 115,000 D. 200,000

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 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On December 31, 2021, Rafferty Company leased equipment under a finance lease. Annual lease payments of P200,000 are due December 31 for 10 years. The useful life of the equipment is 10 years, and the interest rate implicit in the lease is 10%.

The finance lease obligation was recorded onDecember 31, 2021, at P1,350,000, and the first lease payment was made on that date.

Question:

What amount should be includedc in current liabilities on December 31, 2021 in relation to the lease?

A. 65,000

B. 85,000

C. 115,000

D. 200,000

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