XYZ Company entered into the following two leases on January 1, 2006: ? A truck

Question

XYZ Company entered into the following two leases on January 1, 2006:
? A truck was leased on an operating lease that requires annual payments of $40,000 every December 31 for five years
? Equipment was leased on a capital lease that requires annual payments of $90,000 every December 31 for nine years
Assuming an interest rate of 10%, calculate the amount of the lease liability that will appear on XYZ Company's December 31, 2007 balance sheet.
Enter your answer with two places after the decimal point (i.e., $123,456.70).
You will need to use the time value of money factors posted in carmen to answer this question.

Explanation / Answer

Liability -"An obligation that legally binds an individual or company to settle a debt" Thanks to InvestorWords So the question is basically asking how much will you still owe as of December 31, 2007. Which is only 1 year later. $40,000 + $90,000 (interest 1.10 or 10%) = $143,000 Now you just subtract it from the total. $90,000 * 9 years + total interest $8,100 = $890,100 $40,000 * 5 years + total interest $2,000 = $220,000 Total = $1,111,000 $1,111,000- $143,000 = $968,000 Answer = $968,000 is current liability I hope this helped, best of luck.

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.