-On December 30, 20x8, Rafferty Corp. leased equipment. Annual lease payments of P20,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The present value of the lease payments on December 30, 20x8 before the first lease payment is P135,000. The first lease payment was made on that date. What amount should Rafferty include in current liabilities for this lease in its December 31, 20x8, balance sheet? a. 6,500 b. 8,500 c. 11,500 d. 20,000

-On December 30, 20x8, Rafferty Corp. leased equipment. Annual lease payments of P20,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The present value of the lease payments on December 30, 20x8 before the first lease payment is P135,000. The first lease payment was made on that date. What amount should Rafferty include in current liabilities for this lease in its December 31, 20x8, balance sheet? a. 6,500 b. 8,500 c. 11,500 d. 20,000

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

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9. On December 30, 20x8, Rafferty Corp. leased equipment.
Annual lease payments of P20,000 are due December 31 for 10
years. The equipment's useful life is 10 years, and the interest
rate implicit in the lease is 10%. The present value of the lease
payments on December 30, 20x8 before the first lease payment
is P135,000. The first lease payment was made on that date.
What amount should Rafferty include in current liabilities for
this lease in its December 31, 20x8, balance sheet?
a. 6,500
(AICPA)
b. 8,500
с. 11,500
d. 20,000

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