On December 31, 2020, Naruto Company signed a 7-year finance lease for an airplane to transport its basketball team around the country. The airplane’s fair value was P8,415,000. Naruto made the first annual lease payment of P1,530,000 on December 31, 2020. Naruto’s incremental borrowing rate was 12%, and the interest rate implicit in the lease, which was known by Naruto, was 9%. The following are the rounded present value factors for an annuity due. 9% for 7 years 5.5 12% for 7 years 5.1 What amount should Naruto report as lease liability in its December 31, 2020 balance sheet?
On December 31, 2020, Naruto Company signed a 7-year finance lease for an airplane to transport its basketball team around the country. The airplane’s fair value was P8,415,000. Naruto made the first annual lease payment of P1,530,000 on December 31, 2020. Naruto’s incremental borrowing rate was 12%, and the interest rate implicit in the lease, which was known by Naruto, was 9%. The following are the rounded present value factors for an annuity due. 9% for 7 years 5.5 12% for 7 years 5.1 What amount should Naruto report as lease liability in its December 31, 2020 balance sheet?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, Naruto Company signed a 7-year finance lease for an airplane to transport its basketball team around the country. The airplane’s fair value was P8,415,000. Naruto made the first annual lease payment of P1,530,000 on December 31, 2020. Naruto’s incremental borrowing rate was 12%, and the interest rate implicit in the lease, which was known by Naruto, was 9%. The following are the rounded present value factors for an annuity due.
|
9% for 7 years |
5.5 |
|
12% for 7 years |
5.1 |
What amount should Naruto report as lease liability in its December 31, 2020 balance sheet?
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