Answered: the present value of lease liability is…

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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2. An entity entered into a lease of building on January 1, 2019 with the following information:

Annual rental payable at the end of each year - 500,000

Lease term - 5 years

Useful life of building - 20 years

Implicit interest rate - 10%

The lease contained an option for the lease to extend for a further 5 years. At the commencement date, the exercise of the extension option is not reasonably certain. After 3 years, however, on January 1, 2022, the lessee decided to extend the lease for a further 5 years. New annual rental payable at the end of each year - 600,000 New implicit interest rate - 8% On January 1, 2022, the present value of lease liability is (Round off final answer to whole number)

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