back for 4 yearn at the prevailling market rental.with remaining life of 10 years and immedintely leased ittthe beginning of current yeT, A entity wd an equipmentPresent value of an ordinary nnuity ofAnnual rental pxyable at the end ofeschyearfor 4 yearst the prevailing market rental.Sale price at fair valueCarrying amount of equipmentenual rental payable at the end of each vear6,000,0004.500,000800,00010%Implicit interest rateLat 10% for four periods3171 What is the initial lease liability?a 2,536,000b. 3,200,000c. 3,000,000d.2 What is the cost of right of use asset?a 1,902,000b. 2,598,000c. 2,536,000d.3. Whta is the gain on right transferred"866.000b.634.000760.0001 What ia the annual depreciarion of the lesere475,500134,000

1. Initial lease liability: Annual rental payable at the end of each year* Present value of an…

Answered: What is the initial lease liability?

Business

Accounting

What is the initial lease liability?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Annual Lease ayment Plus GRV 0 101571 LA $ Lease Amortization Schedule Interest on Liability 0 $…

A: Annual lease payment on a lease has both interest payment and a portion of lease liability.

Q: Discuss how the lease liability would be measured at lease inception.

A: Lease Liability is the present value of the financial obligation of the lease for the lease…

Q: What are some important lease provisions which investors should be aware of when analyzing the…

A: An investment becomes a real estate investment trust (REIT) when it satisfies certain provisions.…

Q: What is leveraged lease?

A: A leveraged lease could be a rent deed that's financed by a third-party financial institution with…

Q: What comprises a lessee’s minimum lease payments? What is excluded?

A: A lease is a contractual obligation under which one party (lessee) uses the assets or resources of…

Q: many

A: A lease is a contractual agreement between two parties wherein the lessor (owner) provides the right…

Q: Why would a lease include a contingent payment provision? Explain.

A: Contingency payment provisions is a provision for a possible event or circumstance which is not…

Q: What payments are included in the lease liability?

A: Lease agreement refers to an agreement in which a contract is made to get the asset on lease. The…

Q: What is a “per procedure” lease and how does it differ from a standard lease?

A: A lease is the written agreement between the two parties in which one transfers the asset to the…

Q: What situations cause us to remeasure a lease liability and right-of-use asset How is that…

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: What is the difference between an “operating” and a “capital” lease? In easy terms please!

A: The criteria for defining the lease as a capital lease or operating lease As per the notes issued…

Q: Why is it appropriate to compare the cost of lease financing with that of debtfinancing?

A: Cost of lease financing is the cost that is bear by the lessee who have owned the right from the…

Q: What is meant by Minimum Lease Payment?

A: Lease: It is an agreement between two parties in which one party agrees to give an asset on lease…

Q: At the beginning of a Type B lease, the lessor will record what asset and liability, if any?

A: Lease:An agreement of contract that is made to transfer the right to utlize the resources for a…

Q: Describe the effect on the lessee of a “bargain purchase option” on accounting for a finance lease…

A: Lease agreement refers to an agreement in which a contract is made to get the asset on lease. The…

Q: When can a lease create both an asset and a liability for the lessee?

A: Lease is an agreement between two persons in which one grants the right to another to use a…

Q: Who are the two parties to a lease transaction?

A: Lease: Leases are agreements in which the proprietor of the asset permits another party to utilize…

Q: write the financing options of the lease?

A: Lease: It is an agreement between two parties where the one party agrees to rent an asset owned by…

Q: Explain the impact on lease accounting of other payments, including nonleasepayments, initial direct…

A: Uncertainties in lease transactions: There are several issues with respect to lease transactions…

Q: From a lessee perspective, distinguish between a finance lease and an operating lease.

A: Lessees have available two lease accounting methods: (a) the operating method and (b) the…

Q: Would using a higher discount rate increase or decrease the amount of lease liability recorded?

A: Lease: A contractual agreement for an asset between two parties. The parties involved are lessee and…

Q: What is the reason for excluding variable lease payments from the measurement of the lessee’s lease…

A: Under IFRS 16, In lease payments there are two types of payments. One is fixed and other is variable…

Q: is the basic concept of “substance over form” influences lease accounting? Explain.

A: Lease:A lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: What are the primary benefits to a lessor of entering into a lease arrangement

A: The primary benefits to a lessor of entering into a lease arrangement will be explained:

Q: At the beginning of an operating lease, the lessee will record what asset and liability, if any?

A: During the lease period if ownership of the asset is not transferred to Lessee. Lessee has only…

Q: At the beginning of a Type B lease, the lessee will record what asset and liability, if any?

A: Type B lease implies to the lease in which insignificant portion of the useful life of the asset is…

Q: How do you think expense stops and CPI adjustments in leases affect the riskiness of the lease from…

A: INTRODUCTIONLease is a contract in which the right to use the asset is given by the lessor to the…

Q: In accounting for a finance lease/ Sale-type lease, how are the lessee's and lessor's income…

A: The income statements of the lessor and lessee are affected in finance leases and sale-type leases.…

Q: opinion: Should lease payments be a current liability included in the acid-test ratio? why

A: Acid-test ratio: The financial ratio which evaluates the ability of a company to pay off the instant…

Q: What is the difference between a "capital/financing lease" and an "operating lease"? Where on the…

A: Financial statements are formal reports generated by a company's account system that give a…

Q: Describe about the lease expenses in a finance lease?

A: Finance lease: The finance lease refers to the contract between two parties which satisfies the…

Q: Compare the way a bargain purchase option and a residual value are treated by the lessee when…

Q: Can the present value of minimum lease payments differ between the lessor and lessee? If so, how?

A: Leases: Lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: When are initial direct costs recognized in an operating lease? In a direct financing lease? In a…

Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

back for 4 yearn at the prevailling market rental.
with remaining life of 10 years and immedintely leased it
tthe beginning of current yeT, A entity wd an equipment
Present value of an ordinary nnuity of
Annual rental pxyable at the end ofeschyear
for 4 yearst the prevailing market rental.
Sale price at fair value
Carrying amount of equipment
enual rental payable at the end of each vear
6,000,000
4.500,000
800,000
10%
Implicit interest rate
Lat 10% for four periods
317
1 What is the initial lease liability?
a 2,536,000
b. 3,200,000
c. 3,000,000
d.
2 What is the cost of right of use asset?
a 1,902,000
b. 2,598,000
c. 2,536,000
d.
3. Whta is the gain on right transferred"
866.000
b.
634.000
760.000
1 What ia the annual depreciarion of the lesere
475,500
134,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What factors would tend to affect the value of a lease?
What is the classification of the lease in the accounting for initial direct costs?
Define each of the following terms:e. Guideline lease
Describe the lessor's accounting for a direct financing lease.
What discount rate should be used to evaluate a lease? Why?
Distinguish between a financing lease and an operational lease from the lessee's standpoint.
What is a short-term lease? Describe lessee accounting for a short-term lease.
Where does the operating lease liability reported?
What are executory costs? How are they accounted for by the lessee in a capital lease when paid by the lessee? When paid by the lessor? Explain.
A lease liability is measured at the fair value of the underlying asset. Question: True or False