FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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  • Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,300 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.

Lease
 Payment

Cash
 Payment

Effective
 Interest

Decrease in
 Balance

Outstanding
 Balance

 

 

 

 

 

 

 

 

 

32,350

 

1

7,000

 

??

 

 

??

 

 

25,350

 

2

7,000

 

1,775

 

 

5,225

 

 

20,125

 

3

7,000

 

1,409

 

 

5,591

 

 

14,534

 

4

7,000

 

1,017

 

 

5,983

 

 

8,551

 

5

7,000

 

??

 

 

??

 

 

??

 

6

2,300

 

150

 

 

2,150

 

 

0

 

 What is the outstanding balance after payment 5?

  1. $2,150.
  2. $2,300.
  3. $2,450.
  4. $4,450.

 

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