On January 1, 2016, Blaugh Co. signed a long-term lease for an office building. The terms of the lease requiredBlaugh to pay $10,000 annually, beginning December 30, 2016, and continuing each year for 30 years. Thelease qualifies as a capital lease. On January 1, 2016, the present value of the lease payments is $112,500 at the8% interest rate implicit in the lease. In Blaugh’s December 31, 2016, balance sheet, the capital lease liabilityshould bea. $102,500b. $111,500c. $112,500d. $290,000
On January 1, 2016, Blaugh Co. signed a long-term lease for an office building. The terms of the lease requiredBlaugh to pay $10,000 annually, beginning December 30, 2016, and continuing each year for 30 years. Thelease qualifies as a capital lease. On January 1, 2016, the present value of the lease payments is $112,500 at the8% interest rate implicit in the lease. In Blaugh’s December 31, 2016, balance sheet, the capital lease liabilityshould bea. $102,500b. $111,500c. $112,500d. $290,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2016, Blaugh Co. signed a long-term lease for an office building. The terms of the lease required
Blaugh to pay $10,000 annually, beginning December 30, 2016, and continuing each year for 30 years. The
lease qualifies as a capital lease. On January 1, 2016, the present value of the lease payments is $112,500 at the
8% interest rate implicit in the lease. In Blaugh’s December 31, 2016,
should be
a. $102,500
b. $111,500
c. $112,500
d. $290,000
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