The lessor company leases a building to the lessee company on 1/1/2021. The lessee will make ten
Question:
The lessor company leases a building to the lessee company on 1/1/2021. The lessee will make ten annual rental payments of $40,000 at the beginning of each year, starting from 1/1/2021. Both parties expect a residual value of $14,000 at the end of the lease term, though this amount is not guaranteed. The lessor company set the lease payments with the intent of earning a 10% return, and the lessee is aware of this rate. Suppose the lessee incurs initial direct costs of $7,370 related to the lease. What is the amount for Right-of-Use Asset the lessee will record on 1/1/2021? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.)
Future Value Single Sum | Present Value Single Sum | Future Value Ordinary Annuity | Present Value Ordinary Annuity | Present Value Annuity Due | |
10%, 10 periods | 2.59 | 0.39 | 15.94 | 6.14 | 6.76 |
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson