On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is $20,000 due on December 31 of 2020, 2021, 2022, and 2023. The fair value of the machine on January 1, 2020 is $69,302. The machine has no residual value. Most could borrow on a four-year collateralized loan at 6%. If the lease is accounted for as a finance lease, Most’s December 31, 2020 balance sheet would show a right-to-use asset and a finance lease liability of Select one: a. Right-to-use asset $51,976; Finance lease liability $ 53,460 b. Right-to-use asset $53,460; Finance lease liability $ 55,273 c. Right-to-use asset $60,000; Finance lease liability $ 60,000 d. Right-to-use asset $49,355; Finance lease liability $ 57,343
On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is $20,000 due on December 31 of 2020, 2021, 2022, and 2023. The fair value of the machine on January 1, 2020 is $69,302. The machine has no residual value. Most could borrow on a four-year collateralized loan at 6%. If the lease is accounted for as a finance lease, Most’s December 31, 2020 balance sheet would show a right-to-use asset and a finance lease liability of Select one: a. Right-to-use asset $51,976; Finance lease liability $ 53,460 b. Right-to-use asset $53,460; Finance lease liability $ 55,273 c. Right-to-use asset $60,000; Finance lease liability $ 60,000 d. Right-to-use asset $49,355; Finance lease liability $ 57,343
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is $20,000 due on December 31 of 2020, 2021, 2022, and 2023. The fair value of the machine on January 1, 2020 is $69,302. The machine has no residual value. Most could borrow on a four-year collateralized loan at 6%. If the lease is accounted for as a finance lease, Most’s December 31, 2020
Select one:
a. Right-to-use asset $51,976; Finance lease liability $ 53,460
b. Right-to-use asset $53,460; Finance lease liability $ 55,273
c. Right-to-use asset $60,000; Finance lease liability $ 60,000
d. Right-to-use asset $49,355; Finance lease liability $ 57,343
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