Francisco leased equipment from Julio on December 31, 2011. The lease is a 10-year lease with annual payments of $150,000 due on December 31 of each year. The present value of the lease is $1,020,000. Francisco's incremental borrowing rate is 12% for this type of lease. The implicit rate of 10% is known by the lessee. What should be the balance in Francisco lease liability at December 31, 2012?
Francisco leased equipment from Julio on December 31, 2011. The lease is a 10-year lease with annual payments of $150,000 due on December 31 of each year. The present value of the lease is $1,020,000. Francisco's incremental borrowing rate is 12% for this type of lease. The implicit rate of 10% is known by the lessee. What should be the balance in Francisco lease liability at December 31, 2012?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Question
Solve this issue please
Transcribed Image Text:Francisco leased equipment from Julio on December 31, 2011.
The lease is a 10-year lease with annual payments of $150,000
due on December 31 of each year. The present value of the lease
is $1,020,000. Francisco's incremental borrowing rate is 12%
for this type of lease. The implicit rate of 10% is known by the
lessee.
What should be the balance in Francisco lease liability at
December 31, 2012?
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