Concept explainers
Finance lease; lessee;
• LO15–2
(Note: Brief Exercises 4, 5, and 6 are three variations of the same basic situation.)
A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. If the lessee’s fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable?
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