At the beginning of the current year EDSA Company leased equipment from a lessor with the following
Question:
At the beginning of the current year EDSA Company leased equipment from a lessor with the following pertinent information: a) Annual rental payable at the end of each year 500,000 b) Lease term 8 years c) Useful life of equipment 10 years d) Implicit interest rate 10% e) PV of an ordinary annuity of 1 for 8 periods at 10% 5.33 f) Present value of 1 for 8 periods at 10% .47. The entity has the option to purchase the equipment on the expiration of the lease term by paying 500,000.00. There is reasonable certainty that the entity shall exercise the option. The entity incurred an initial direct cost of 200,000. What is the lease liability at year-end?
2,690,000
2,790,000
2,848,500
2,398,500
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach