A lessee company signed a lease for equipment from a lessor on January 1, Year 1. The lease requires equal rental payments of $18,820 at the beginning of each year of the term. The PV of the lease payments is $108,950. The company pays all executory costs directly to third parties. The appropriate interest rate is 8.65%. Assume IFRS 16 applies. Both the lessor and lessee have December 31 year ends. How much wil be the balance of the Lease Liability in the lessee's books at the end of Year 1 after all adjusting entries assuming (1) the fair value of the equipment equals the PV of the lease payments and (2) any interest is accrued directly to the Lease Liability? 1. $88,134 2. $90,582 3. $93,030 4. $95,478 5. $97,926

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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.