On March 31, 2021, Southwest Gas leased equipment from a supplier and agreed to pay $200,000 annually

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On March 31, 2021, Southwest Gas leased equipment from a supplier and agreed to pay $200,000 annually for 20 years beginning March 31, 2022. Generally accepted accounting principles require that a liability be recorded for this lease agreement for the present value of scheduled payments. Accordingly, at inception of the lease, Southwest recorded a $2,293,984 lease liability.


Required:
Determine the interest rate implicit in the lease agreement.

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Intermediate Accounting

ISBN: 978-1260481952

10th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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