On December 30, 20x5, Haber Co. leased a new machine from Gregg Corp. The following data relateto the lease transaction at the inception of the lease:10 yearsP100,00012 yearsLease termAnnual rental payable at the end of each lease yearUseful life of machineImplicit interest rate10%The lease has no renewal option, and the possession of the machine reverts to Gregg when the leaseterminates. At the inception of the lease, Haber should record a lease liability of (rounded-off)а. 0b. 615,000с. 630,000d. 676,000

Since the lease term of 10 years is for the majority part of the useful life of the asset of 12…

Answered: ease transaction at the inception of…

ease transaction at the inception of the lease erm I rental payable at the end of each lease yea life of machine t interest rate nas no renewal option, and the possession.

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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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

100%

On December 30, 20x5, Haber Co. leased a new machine from Gregg Corp. The following data relate
to the lease transaction at the inception of the lease:
10 years
P100,000
12 years
Lease term
Annual rental payable at the end of each lease year
Useful life of machine
Implicit interest rate
10%
The lease has no renewal option, and the possession of the machine reverts to Gregg when the lease
terminates. At the inception of the lease, Haber should record a lease liability of (rounded-off)
а. 0
b. 615,000
с. 630,000
d. 676,000

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