FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:On January 1, 2018, Naw Corporation leased a piece of machinery from Hoffherr Machinery's. The lease is a(n) 10 year, non-cancellable lease that requires
lease payments of $5,000 due at the beginning of each year. The lease has been determined to be a capital lease because at least one of the classification
criteria has been met. Naw Corporation needs to determine the present value of the lease payments so that they can record the asset and the liability at
lease inception. Hoffherr Machinery's implicit rate of 10% is known to Naw Corporation. Complete the following from the perspective of Naw Corporation.
Which of the following financial statement items is impacted in this transaction?
The problem is solving for:
The calculation involves:
Excel®
Formula
Variables =
Total
asset
asset
=
asset
PV
To record the inception of the lease
cash
PV
33795
Accounts
To record the first lease payment
( Rate
( .1
Date of Delivery
Debit
33795
5000
Leases Obligation
Present Value
An Annuity Due
Nper
10
EXCELⓇ
Credit
33795
5000
Pmt
-5000
"
FV
0
Type
1
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