Rumsfeld Corporation leased a machine on December 31, 2021, for a three-year period. The lease agreement calls for annual payments in the amount of $16,000 on December 31 of each year beginning on December 31, 2021. Rumsfeld has the option to purchase the machine on December 31, 2024, for $20,000 when its fair value is expected to be $40,000. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 12%. n, i PV of $1 PV, ordinary annuity PV, annuity due 1 period, 12% 0.89286 0.89286 1.00000 2 periods, 12% 0.79719 1.69005 1.89286 3 periods, 12% 0.71178 2.40183 2.69005 Required: 1. Calculate the amount to be recorded as a right-of-use asset and the associated lease liability. 2. Prepare an amortization schedule for this lease.
Rumsfeld Corporation leased a machine on December 31, 2021, for a three-year period. The lease agreement calls for annual payments in the amount of $16,000 on December 31 of each year beginning on December 31, 2021. Rumsfeld has the option to purchase the machine on December 31, 2024, for $20,000 when its fair value is expected to be $40,000. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 12%. n, i PV of $1 PV, ordinary annuity PV, annuity due 1 period, 12% 0.89286 0.89286 1.00000 2 periods, 12% 0.79719 1.69005 1.89286 3 periods, 12% 0.71178 2.40183 2.69005 Required: 1. Calculate the amount to be recorded as a right-of-use asset and the associated lease liability. 2. Prepare an amortization schedule for this lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rumsfeld Corporation leased a machine on December 31, 2021, for a three-year period. The lease agreement calls for annual payments in the amount of $16,000 on December 31 of each year beginning on December 31, 2021. Rumsfeld has the option to purchase the machine on December 31, 2024, for $20,000 when its fair value is expected to be $40,000. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 12%. n, i PV of $1 PV, ordinary annuity PV, annuity due 1 period, 12% 0.89286 0.89286 1.00000 2 periods, 12% 0.79719 1.69005 1.89286 3 periods, 12% 0.71178 2.40183 2.69005 Required: 1. Calculate the amount to be recorded as a right-of-use asset and the associated lease liability. 2. Prepare an amortization schedule for this lease.
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