Question
Laurel Inc. entered into a 5-year lease agreement of equipment requiring $10,000 annual payments, with the first payment due immediately. The lease does not contain
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Laurel Inc. entered into a 5-year lease agreement of equipment requiring $10,000 annual payments, with the first payment due immediately. The lease does not contain a renewal or purchase option, and the asset reverts to the lessor at the end of the four-year period with no guaranteed residual. The lessees incremental borrowing rate is 8% and the implicit rate of the lease is 9%, known by the lessee. Just prior to the lease commencement, the lessee (a) incurred legal fees to execute the lease of $800, (b) received $2,500 from the lessor as a lease incentive to sign the new lease, and (c) made the first annual payment of $10,000.
What is the amount of the lease liability recognized by Laurel Inc. at the commencement of the lease?
a. $28,566
b. $32,397
c. $43,613
d. $46,613
Laurel Inc. entered into a 5-year lease agreement of equipment requiring $10,000 annual payments, with the first payment due immediately. The lease does not contain a renewal or purchase option, and the asset reverts to the lessor at the end of the four-year period with no guaranteed residual. The lessees incremental borrowing rate is 8% and the implicit rate of the lease is 9%, known by the lessee. Just prior to the lease commencement, the lessee (a) incurred legal fees to execute the lease of $800, (b) received $2,500 from the lessor as a lease incentive to sign the new lease, and (c) made the first annual payment of $10,000.
What is the amount of the lease liability recognized by Laurel Inc. at the commencement of the lease?
a. | $28,566
| |
b. | $32,397
| |
c. | $43,613
| |
d. | $46,613
|
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