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On January 1, 2011, a company entered into a lease agreement for equipment used in the manufacturing process. The annual lease payment is $24,000 to
On January 1, 2011, a company entered into a lease agreement for equipment used in the manufacturing process. The annual lease payment is $24,000 to be paid each December 31 for 5 years. The equipment reverts to the lessor at the end of the 5 years. The company recently borrowed money from a bank for the same period of time at an annual rate of 10%. The market value of the equipment at the inception of the lease is $120,000 and the total useful life of the equipment is 5 years. What is the carrying value of the lease liability at the inception of the lease? A. $120,000 B. $90, 979 C. S92, 661 Ignoring any entries associated with depreciation, what is the interest expense on December 31, 2011? A. $12,000 B. $0 C. $9, 098 Assume that all depreciation expense is recorded at the end of the year using a straight-line method with zero salvage value. What is the carrying value of the asset after the all entries are made on December 31, 2011? A. $72, 783 B. $18, 196 C. $96,000
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