The Harris Company is the lessee on a four-year lease with the following payments at the end
Question:
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year:
| | |
Year 1: | $ | 11,000 |
Year 2: | $ | 16,000 |
Year 3: | $ | 21,000 |
Year 4: | $ | 26,000 |
|
An appropriate discount rate is 7 percentage, yielding a present value of $61,233.
a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset?
a-2. If the lease is an operating lease, what will be the initial value of the lease liability?
a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?
a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1?
a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1?
b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset?
b-2. If the lease is a finance lease, what will be the initial value of the lease liability?
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair