Hopper Corporation signed a ten-year capital lease on January 1, 2012. The lease requires annual payments of

Question:

Hopper Corporation signed a ten-year capital lease on January 1, 2012. The lease requires annual payments of $8,000 every December 31.

Required

1. Assuming an interest rate of 9%, calculate the present value of the minimum lease payments.

2. Explain why the value of the leased asset and the accompanying lease obligation are not reported on the balance sheet initially at $80,000.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...