On January 1, 2021, Wait Company leased equipment from a lessor with the following information: Annual rental payable every December 31: 2,000,000 Residual value guarantee: 1,000,000 Initial direct cost: 600,000 Estimated dismantling and restoration cost required by contract at present value: 780,000 Annual executory cost paid by the entity: 100,000 The lease term is four years while the equipment’s useful life is 8 years. The implicit rate in the lease, known by the entity, is 10%. § The present value of an ordinary annuity of 1 at 10% for 4 periods is: 3.17 § The present value of
On January 1, 2021, Wait Company leased equipment from a lessor with the following information: Annual rental payable every December 31: 2,000,000 Residual value guarantee: 1,000,000 Initial direct cost: 600,000 Estimated dismantling and restoration cost required by contract at present value: 780,000 Annual executory cost paid by the entity: 100,000 The lease term is four years while the equipment’s useful life is 8 years. The implicit rate in the lease, known by the entity, is 10%. § The present value of an ordinary annuity of 1 at 10% for 4 periods is: 3.17 § The present value of
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
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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On January 1, 2021, Wait Company leased equipment from a lessor with the following information:
Annual rental payable every December 31: 2,000,000
Residual value guarantee: 1,000,000
Initial direct cost: 600,000
Estimated dismantling and restoration cost required by contract at present value: 780,000
Annual executory cost paid by the entity: 100,000
The lease term is four years while the equipment’s useful life is 8 years. The implicit rate in the lease, known by the entity, is 10%.
§ The present value of an ordinary annuity of 1 at 10% for 4 periods is: 3.17
§ The present value of 1 at 10% for 4 periods is: 0.68
1. What is the initial lease liability?
Group of answer choices
6,340,000
7,020,000
8,000,000
8,400,000
2. What is the cost of the right of use asset?
Group of answer choices
6,340,000
7,020,000
8,400,000
8,000,000
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