On January 1, 2025, Splish Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Splish's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Splish. Title to the equipment transfers to Splish at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (f) What is the value of the lease liability if Splish also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments? (Round answers to O decimal places, eg. 5,275.) Lease liability $
On January 1, 2025, Splish Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Splish's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Splish. Title to the equipment transfers to Splish at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (f) What is the value of the lease liability if Splish also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments? (Round answers to O decimal places, eg. 5,275.) Lease liability $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Splish Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the
beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized
on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Splish's incremental borrowing
rate is 7%, and the implicit rate in the lease is 6%, which is known by Splish. Title to the equipment transfers to Splish at the end of the
lease. The asset has an estimated useful life of 5 years and no residual value.
Click here to view factor tables.
(f)
What is the value of the lease liability if Splish also agreed to pay the fixed annual insurance on the equipment of $2,000 at the
same time as the rental payments? (Round answers to O decimal places, eg. 5,275.)
Lease liability $
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