Sage Hill Fashion Company enters into a lease arrangement with Highpoint Leasing for 5 years. Sage Hill agrees to pay 4% of its net sales as a variable lease payment. Sage Hill does not pay any fixed payments. Sage Hill is a highly successful company that has achieved over $1,350,000 in net sales over the last 7 years. Both Sage Hill and Highpoint forecast that net sales will be a much greater amount than $1,350,000 in subsequent years. As a result, it is highly certain that Sage Hill will make payments of at least $54,000 ($1,350,000 × 4%) each year. What is the lease payment amount Sage Hill should use to record its right-of-use asset? Lease payment   $enter the lease payment in dollars

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Sage Hill Fashion Company enters into a lease arrangement with Highpoint Leasing for 5 years. Sage Hill agrees to pay 4% of its net sales as a variable lease payment. Sage Hill does not pay any fixed payments. Sage Hill is a highly successful company that has achieved over $1,350,000 in net sales over the last 7 years. Both Sage Hill and Highpoint forecast that net sales will be a much greater amount than $1,350,000 in subsequent years. As a result, it is highly certain that Sage Hill will make payments of at least $54,000 ($1,350,000 × 4%) each year.

What is the lease payment amount Sage Hill should use to record its right-of-use asset?

Lease payment   $enter the lease payment in dollars 
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Right-of-use assets will be recognized at the present value of minimum lease payment obligations.

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