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On January 1, 20x6, Day

On January 1, 20x6, Day

Intermediate Accounting: Reporting And Analysis
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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On January 1, 20x6, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for a piece of industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day's January 1, 20x6 balance sheet, the principal amount of the lease obligation was а. 63,374 b. 61,446 с. 58,112 d. 56,502
Transcribed Image Text:On January 1, 20x6, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for a piece of industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day's January 1, 20x6 balance sheet, the principal amount of the lease obligation was а. 63,374 b. 61,446 с. 58,112 d. 56,502
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