ment for $55,000 with payments due at the end of the following questions. (Hint: See Table 19-1.) ance sheet? Do not round intermediate calculations calculations. Round your answer to the nearest cen r answer to the nearest cent. Enter your answer as t round intermediate calculations. Round your answ intermediate calculations. Round your answer to th ound intermediate calculations. Round your answer
ment for $55,000 with payments due at the end of the following questions. (Hint: See Table 19-1.) ance sheet? Do not round intermediate calculations calculations. Round your answer to the nearest cen r answer to the nearest cent. Enter your answer as t round intermediate calculations. Round your answ intermediate calculations. Round your answer to th ound intermediate calculations. Round your answer
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 1P
Related questions
Question
![Financial Statement Reporting for a Finance Lease
Reynolds Construction (RC) needs a piece of equipment that costs $100,000. The equipment has an economic life of 2 years and no residual value. The
equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 7% with
payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due at the end of the year. Assume RC chooses
the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.)
a. What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the
nearest cent. Enter your answer as a positive value.
$
b. What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent.
$
c. What will RC report as an interest expense at Year 1? Round your answer to the nearest cent. Enter your answer as a positive value.
$
d. What will RC report as an amortization expense at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter
your answer as a positive value.
$
e. What will RC report as the lease liability at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your
answer as a positive value.
$
f. What will RC report as the right-of-use asset at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent.
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc98508c7-e092-496c-a84e-ac5cab5dc5c6%2F5a0d3dbb-789d-4903-9bb1-1f092589cd7f%2Fpn5ixa_processed.png&w=3840&q=75)
Transcribed Image Text:Financial Statement Reporting for a Finance Lease
Reynolds Construction (RC) needs a piece of equipment that costs $100,000. The equipment has an economic life of 2 years and no residual value. The
equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 7% with
payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due at the end of the year. Assume RC chooses
the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.)
a. What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the
nearest cent. Enter your answer as a positive value.
$
b. What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent.
$
c. What will RC report as an interest expense at Year 1? Round your answer to the nearest cent. Enter your answer as a positive value.
$
d. What will RC report as an amortization expense at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter
your answer as a positive value.
$
e. What will RC report as the lease liability at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your
answer as a positive value.
$
f. What will RC report as the right-of-use asset at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent.
$
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