The lease has no renewal option, the possession of the machine reverts to Thor when the lease terminates, and the machine does have alternative uses. The first lease payment of $30,000 is paid at the inception of the lease. What is the amount of the first year's lease expense attributable to the interest component? O $7.183 O $7,949 O $30,000 O $0. It is an operating lease so there is no interest component.
The lease has no renewal option, the possession of the machine reverts to Thor when the lease terminates, and the machine does have alternative uses. The first lease payment of $30,000 is paid at the inception of the lease. What is the amount of the first year's lease expense attributable to the interest component? O $7.183 O $7,949 O $30,000 O $0. It is an operating lease so there is no interest component.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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T2.
Transcribed Image Text:The lease has no renewal option, the possession of the machine reverts to Thor when the lease terminates, and the machine does have
alternative uses. The first lease payment of $30,000 is paid at the inception of the lease. What is the amount of the first year's lease
expense attributable to the interest component?
O $7.183
O $7,949
O $30,000
O $0. It is an operating lease so there is no interest component.
Transcribed Image Text:Current Attempt in Progress
On 1/01/Y5, Zeus Company leased a new machine from Thor Corp. The following data relate to the lease transaction at its inception:
Lease term
Annual rental payable at beginning of each lease year
Useful life of machine
Implicit interest rate
Present value of an annuity of 1 in advance for 5 periods at 8%
Present value of annuity of 1 in arrears for 5 periods at 8%
Fair value of the machine
5 years
$30,000
10 years
8%
4.3121
3.9927
11
$200,000
The lease has no renewal option, the possession of the machine reverts to Thor when the lease terminates, and the machine does have
alternative uses. The first lease payment of $30,000 is paid at the inception of the lease. What is the amount of the first year's lease
expense attributable to the interest component?
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