On January 1, 2021, Lang Corporation leased a ship from Fort Company for an eight- year period expiring December 30, 2029. Equal annual payments of $500,000 are due on January 1 of each year, beginning with January 1, 2021. The lease is properly classified as a finance lease on Lang 's books. The present value on January 1, 2021 of the eight lease payments over the lease term discounted at 10% is $2,934,213. Assuming all payments are made on time, the amount that should be reported by Lang Corporation as the interest expense for this lease for 2021 was a) $500,000. b) $217,763. c) $293,421. d) $243,421.

On January 1, 2021, Lang Corporation leased a ship from Fort Company for an eight- year period expiring December 30, 2029. Equal annual payments of $500,000 are due on January 1 of each year, beginning with January 1, 2021. The lease is properly classified as a finance lease on Lang 's books. The present value on January 1, 2021 of the eight lease payments over the lease term discounted at 10% is $2,934,213. Assuming all payments are made on time, the amount that should be reported by Lang Corporation as the interest expense for this lease for 2021 was a) $500,000. b) $217,763. c) $293,421. d) $243,421.

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, Lang Corporation leased a ship from Fort Company for an eight-
year period expiring December 30, 2029. Equal annual payments of $500,000 are
due on January 1 of each year, beginning with January 1, 2021. The lease is properly
classified as a finance lease on Lang 's books. The present value on January 1, 2021
of the eight lease payments over the lease term discounted at 10% is $2,934,213.
Assuming all payments are made on time, the amount that should be reported by
Lang Corporation as the interest expense for this lease for 2021 was
О
a) $500,000.
b) $217,763.
c) $293,421.
d) $243,421.

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