On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The
Question:
Vaughn's incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease under ASU 2016-02.
Required:
1. At what amount should Vaughn record the leased equipment on October 1, 2017?
2. What is the amount of rent expense that Vaughn should record for the year ended
December 31, 2017, and for the year ended December 31, 2018?
3. How much of the lease liability should be classified as current on December 31, 2017, and December 31, 2018?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Part 1 Value of leased equipment Payment 10000 Interest rate 11 Term 5 Economic life 12 Present Valu...View the full answer
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Related Book For 
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
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