Neal Corp. entered into a nine-year lease on a warehouse on December 31, 20x1. Lease payments of P52,000, which includes payment for non-lease component of P2,000 (at stand-alone selling price), are due annually, beginning on December 31, 20x1, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal's incremental borrowing rate is 9%. What amount should Neal report as lease liability at December 31, 20x1? a. 280,000 b. 291,200 C. 450,000 d. 468,000 CPA)

Neal Corp. entered into a nine-year lease on a warehouse on December 31, 20x1. Lease payments of P52,000, which includes payment for non-lease component of P2,000 (at stand-alone selling price), are due annually, beginning on December 31, 20x1, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal's incremental borrowing rate is 9%. What amount should Neal report as lease liability at December 31, 20x1? a. 280,000 b. 291,200 C. 450,000 d. 468,000 CPA)

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

(AICPA)
3. Neal Corp. entered into a nine-year lease on a warehouse on
December 31, 20x1. Lease payments of P52,000, which includes
payment for non-lease component of P2,000 (at stand-alone
selling price), are due annually, beginning on December 31,
20x1, and every December 31 thereafter. Neal does not know
the interest rate implicit in the lease; Neal's incremental
borrowing rate is 9%. What amount should Neal report as
lease liability at December 31, 20x1?
a. 280,000
(AICPA)
b. 291,200
C. 450,000
d. 468,000

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