Question: On January 1 2013 National Insulation Corporation NIC leased office

On January 1, 2013, National Insulation Corporation (NIC) leased office space under a capital lease. Lease payments are made annually. Title does not transfer to the lessee and there is no bargain purchase option. Portions of the lessee’s lease amortization schedule appear below:

1. What is NIC’s lease liability at the inception of the lease (after the first payment)?
2. What amount would NIC record as a leased asset?
3. What is the lease term in years?
4. What is the asset’s residual value expected at the end of the lease term?
5. How much of the residual value is guaranteed by the lessee?
6. What is the effective annual interest rate?
7. What is the total amount of minimum lease payments?
8. What is the total effective interest expense recorded over the term of thelease?

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  • CreatedDecember 23, 2013
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