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On January 1, 2016, Madison Company signed a four-year lease requiring annual payments of $15,000 with the first payment due on January 1, 2016. The fair value of the equipment leased was $50,000. Madison's incremental borrowing rate was 6%. Actuarial information for 6% follows:   3 Periods 4 Periods 5 Periods Present value of annuity due of $1 2.83339 3.67301 4.46511 Present value of ordinary annuity of $1 2.67301 3.46511 4.21236 Assuming the lease qualifies as a capital lease, what amount should be recorded as leased equipment under capital leases on January 1, 2016 (rounded to the nearest dollar)? $51,977 $48,185 $55,095 $50,000

On January 1, 2016, Madison Company signed a four-year lease requiring annual payments of $15,000 with the first payment due on January 1, 2016. The fair value of the equipment leased was $50,000. Madison's incremental borrowing rate was 6%. Actuarial information for 6% follows:   3 Periods 4 Periods 5 Periods Present value of annuity due of $1 2.83339 3.67301 4.46511 Present value of ordinary annuity of $1 2.67301 3.46511 4.21236 Assuming the lease qualifies as a capital lease, what amount should be recorded as leased equipment under capital leases on January 1, 2016 (rounded to the nearest dollar)? $51,977 $48,185 $55,095 $50,000

FINANCIAL ACCOUNTING
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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    On January 1, 2016, Madison Company signed a four-year lease requiring annual payments of $15,000 with the first payment due on January 1, 2016. The fair value of the equipment leased was $50,000. Madison's incremental borrowing rate was 6%. Actuarial information for 6% follows:

      3 Periods 4 Periods 5 Periods
    Present value of annuity due of $1 2.83339 3.67301 4.46511
    Present value of ordinary annuity of $1 2.67301 3.46511 4.21236

    Assuming the lease qualifies as a capital lease, what amount should be recorded as leased equipment under capital leases on January 1, 2016 (rounded to the nearest dollar)?
    $51,977
    $48,185
    $55,095
    $50,000
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