LMN (the lessee) leased a machine from XYZ (the lessor) on January 1, 2023. Relevant information about the finance lease follows: ▪ The lease has a 5 year term, beginning January 1, 2023 and ending December 31 of the final year of the lease. ▪ The lease requires annual payments of $10,000. The first payment is made on the date the lease is signed (January 1, 2023), and subsequent payments are made on December 31 of 2023 and each December 31 after that. ▪ The asset has a fair value of $43,121 and an economic useful life of 6 years. ▪ The asset will be returned to XYZ (the lessor) at the end of the lease term. ■ The lease includes an implicit interest rate of 8% per year. At that rate, the present value of the lease payments is equal to the asset's fair value.
LMN (the lessee) leased a machine from XYZ (the lessor) on January 1, 2023. Relevant information about the finance lease follows: ▪ The lease has a 5 year term, beginning January 1, 2023 and ending December 31 of the final year of the lease. ▪ The lease requires annual payments of $10,000. The first payment is made on the date the lease is signed (January 1, 2023), and subsequent payments are made on December 31 of 2023 and each December 31 after that. ▪ The asset has a fair value of $43,121 and an economic useful life of 6 years. ▪ The asset will be returned to XYZ (the lessor) at the end of the lease term. ■ The lease includes an implicit interest rate of 8% per year. At that rate, the present value of the lease payments is equal to the asset's fair value.
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 1P: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases...
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Question
![LMN (the lessee) leased a machine from XYZ (the lessor) on January 1, 2023. Relevant information about
the finance lease follows:
▪ The lease has a 5 year term, beginning January 1, 2023 and ending December 31 of the final year of the
lease.
▪ The lease requires annual payments of $10,000. The first payment is made on the date the lease is
signed (January 1, 2023), and subsequent payments are made on December 31 of 2023 and each
December 31 after that.
■ The asset has a fair value of $43,121 and an economic useful life of 6 years.
▪ The asset will be returned to XYZ (the lessor) at the end of the lease term.
▪ The lease includes an implicit interest rate of 8% per year. At that rate, the present value of the lease
payments is equal to the asset's fair value.
Required: What dollar amount will ABC report as the Lease Payable balance as of December 31, 2023 (the
end of the first year, after the second payment)?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5fefc9dc-2b46-483c-919a-896c380a5ad8%2F6766dd3a-413f-469b-ae32-cbbb48260c44%2Fxmflei_processed.png&w=3840&q=75)
Transcribed Image Text:LMN (the lessee) leased a machine from XYZ (the lessor) on January 1, 2023. Relevant information about
the finance lease follows:
▪ The lease has a 5 year term, beginning January 1, 2023 and ending December 31 of the final year of the
lease.
▪ The lease requires annual payments of $10,000. The first payment is made on the date the lease is
signed (January 1, 2023), and subsequent payments are made on December 31 of 2023 and each
December 31 after that.
■ The asset has a fair value of $43,121 and an economic useful life of 6 years.
▪ The asset will be returned to XYZ (the lessor) at the end of the lease term.
▪ The lease includes an implicit interest rate of 8% per year. At that rate, the present value of the lease
payments is equal to the asset's fair value.
Required: What dollar amount will ABC report as the Lease Payable balance as of December 31, 2023 (the
end of the first year, after the second payment)?
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