FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A company enters into a 5-year operating lease agreement effective January 1, Year 1. The rent due on the last day of
each year is $10,000. As an inducement to enter into the lease, the company received half off the first year's rent. The
following information pertains to the company on January 1, Year 1:
Incremental borrowing rate
6%
Present value of $1 for 1 period at 6%
0.943
Present value of ordinary annuity for 5 periods at 6% 4.212
What amount will the company record as the right-of-use asset?
A.
$37,405
B.
$42,120
C.
$45,000
D.
$46,835
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Transcribed Image Text:A company enters into a 5-year operating lease agreement effective January 1, Year 1. The rent due on the last day of each year is $10,000. As an inducement to enter into the lease, the company received half off the first year's rent. The following information pertains to the company on January 1, Year 1: Incremental borrowing rate 6% Present value of $1 for 1 period at 6% 0.943 Present value of ordinary annuity for 5 periods at 6% 4.212 What amount will the company record as the right-of-use asset? A. $37,405 B. $42,120 C. $45,000 D. $46,835
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