On September 30, 2013, Ferguson Imports leased a warehouse. Terms of the lease r
ID: 2704442 • Letter: O
Question
On September 30, 2013, Ferguson Imports leased a warehouse. Terms of the lease require Ferguson to make 12 annual lease payments of $60,000 with the first payment due immediately. Accounting standards require the company to record a lease liability when recording this type of lease. (FV of $1, PV of $1, FVA of $1,PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Assume an 8% interest rate. What amount should Ferguson record the lease liability on September 30, 2013, before the first payment is made?
On September 30, 2013, Ferguson Imports leased a warehouse. Terms of the lease require Ferguson to make 12 annual lease payments of $60,000 with the first payment due immediately. Accounting standards require the company to record a lease liability when recording this type of lease. (FV of $1, PV of $1, FVA of $1,PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Assume an 8% interest rate. What amount should Ferguson record the lease liability on September 30, 2013, before the first payment is made?Explanation / Answer
present value of lease= annual payment(PVAD(n=12,i=8%))
annual payment = 60,000$
present value of lease= 60,000*(PVAD(n=12,i=8%))
= 60,000*8.13896
= 488337.6$
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