Four-year period ending March 31, 2025. The annual lease payment is due at each April 1, starting
Question:
Four-year period ending March 31, 2025. The annual lease payment is due at each April 1, starting from April 1, 2021. Rogers's incremental borrowing rate is 7%. Taylor's implicit interest rate is 8% but it is unknown to lessees. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term and the asset is not of a specialized nature. Instructions (Show your calculations to earn credits, clearly indicate the factors you used in your calculation and round your answers to the nearest dollar) Present Value Tables
A. Assuming an operating lease, what should be the initial measurement of lease liability for Rogers at the commencement of the lease (April 1, 2020)?
B. Prepare journal entry for Rogers to record (1) the commencement of the lease and the lease payment on April 1 and (C) lease expense for 2020.
C. Suppose Rogers incurs initial direct costs of $72,000 related to the lease, recalculate (1) the initial measurement of lease liability on April 1; (2) the initial measurement of Right of Use Asset at the commencement of the lease on April 1 and (3) the annual lease expense for 2020.
Fundamentals of Financial Management
ISBN: 9780273713630
13th Revised edition
Authors: James van Horne, John Wachowicz