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On Dec 31, Year 1, Aurore Co. leased a piece of equipment from Polar Bear Co. for a 5 year term. The terms of the
On Dec 31, Year 1, Aurore Co. leased a piece of equipment from Polar Bear Co. for a 5 year term. The terms of the lease require yearly payments of $315,000 (this includes $15,000 in annual executory costs), due on Dec 31 each year. The 1st payment was made on Dec 31, Year 1, and the 2nd payment on Dec 31, Year 2. The effective interest for this class of lease is 10%. The PVNLP (present value of the minimum lease payments) at the start of the lease (pnor to the first payment) was $1,251,000. Aurora Co. will account for the lease as a finance (capital) lease. On its Dec 31, Year 2 SFP (statement of financial position), Aurora Co. should report a "lease liability" of O $951,000 0 5855,900 0 5746,100 0 5936,000
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