At the beginning of the current year, Lessee Company leased a new machine from Lessor Company with the following information: Annual rental payable at beginning of each lease year 400,000.00 Lease term 10 years Useful life of machine 12 years Implicit interest rate PV of an annuity of 1 in advance for 10 periods at 14% PV of 1 for 10 periods at 14% 14% 5.95 0.27 Lessee Company has the option to purchase the machine upon the expiration of the lease term by paying Php500,000. The purchase option is reasonably certain to be exercised.
At the beginning of the current year, Lessee Company leased a new machine from Lessor Company with the following information: Annual rental payable at beginning of each lease year 400,000.00 Lease term 10 years Useful life of machine 12 years Implicit interest rate PV of an annuity of 1 in advance for 10 periods at 14% PV of 1 for 10 periods at 14% 14% 5.95 0.27 Lessee Company has the option to purchase the machine upon the expiration of the lease term by paying Php500,000. The purchase option is reasonably certain to be exercised.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 3MC: Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of...
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What amount should be reported as lease liability by the end of the first year? *
*see the attached pic
a. 2,515,000
b. 2,380,000
c. 2,115,000
d. 1,980,000
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