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The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $91,200 Lease term, 4 years Economic life of property, 5 years Implicit interest rate, 6% Annual lease payment due on December 31, $25,600 Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. By how much does the lease liability decrease during the first year? Select one: a. $20,128 b. $20,278 c. $5,322 d. $25,600

The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $91,200 Lease term, 4 years Economic life of property, 5 years Implicit interest rate, 6% Annual lease payment due on December 31, $25,600 Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. By how much does the lease liability decrease during the first year? Select one: a. $20,128 b. $20,278 c. $5,322 d. $25,600

FINANCIAL ACCOUNTING
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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The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1:

  • Fair value of equipment at lease inception, $91,200
  • Lease term, 4 years
  • Economic life of property, 5 years
  • Implicit interest rate, 6%
  • Annual lease payment due on December 31, $25,600
  • Present value of the lease payments, $88,707

The equipment reverts back to the lessor at the end of the lease term.

By how much does the lease liability decrease during the first year?
Select one:
a. $20,128
b. $20,278
c. $5,322
d. $25,600
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