On January 1, 2021, Fingerstyle Co. (lessee) enters into a ten-year lease of equipment, with fixed annual payments of P200,000 due at the start of each lease year. The contract itemizes the fixed annual payments as follows: P156,000 for rent, P39,000 for maintenance and P5,000 of administrative tasks. The itemized amounts reflect the relative stand-alone prices of the components. The lessor's implicit interest rate in the lease, known to Fingerstyle Co., is 10%. Compute the total lease-related expenses for 2021?

On January 1, 2021, Fingerstyle Co. (lessee) enters into a ten-year lease of equipment, with fixed annual payments of P200,000 due at the start of each lease year. The contract itemizes the fixed annual payments as follows: P156,000 for rent, P39,000 for maintenance and P5,000 of administrative tasks. The itemized amounts reflect the relative stand-alone prices of the components. The lessor's implicit interest rate in the lease, known to Fingerstyle Co., is 10%. Compute the total lease-related expenses for 2021?

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

On January 1, 2021, Fingerstyle Co. (lessee) enters into a ten-year lease of equipment, with
fixed annual payments of P200,000 due at the start of each lease year. The contract itemizes
the fixed annual payments as follows: P156,000 for rent, P39,000 for maintenance and P5,000
of administrative tasks. The itemized amounts reflect the relative stand-alone prices of the
components. The lessor's implicit interest rate in the lease, known to Fingerstyle Co., is 10%.
Compute the total lease-related expenses for 2021?

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