Chapter 6, Problem 6.15P

To determine

Present Value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:

$\text{Present value of an amount = }\frac{\text{Future value}}{{\left(\text{1 + interest rate}\right)}^{\text{number}\text{of}\text{periods}}}$

Bonds

Governmental agencies, companies and universities are issuing a type of interest bearing notes payable is called as bond. It is one of the important debt instrument used for raising funds.

The initial bond liability.

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Lease A

The amount of lease liability on January 1, 2017.

To determine

Lease B

The amount of lease liability on January 1, 2017.]