On January 1, Lessee Company leases equipment with a useful life of 5 years for a 3-year lease term. Payments of $52,000 are due at the beginning of each year. The incremental borrowing rate is 3%. The present value of the payments is $151,320. Which of the following is true?Lease expense at the end of the first year is $52,000.Amortization expense at the end of the first year is $151,320 divided by 3.The lease liability at the end of the first year is reduced by $52,000.The ROU asset at the end of the first year is $99,320.

Option 1 is the Correct answer i.e Lease expense at the end of the first year is $52,000.

Answered: On January 1, Lessee Company leases…

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, Lessee Company leases equipment with a useful life of 5 years for a 3-year lease term. Payments of $52,000 are due at the beginning of each year. The incremental borrowing rate is 3%. The present value of the payments is $151,320. Which of the following is true?

Lease expense at the end of the first year is $52,000.
Amortization expense at the end of the first year is $151,320 divided by 3.
The lease liability at the end of the first year is reduced by $52,000.
The ROU asset at the end of the first year is $99,320.

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