Question
On January 1, Year 1, Tel Company signed a 4-year non-cancellable lease for an Industrial Machine. According to the lease agreement, Tel Company paid $5,000
On January 1, Year 1, Tel Company signed a 4-year non-cancellable lease for an Industrial Machine. According to the lease agreement, Tel Company paid $5,000 on January 1, Year 1. Moreover Tel Company has to make annual payments of $10,000 at the end of each year, starting 31st December, Year 1. The interest rate of this contract is 6%. The present value of the four payments to be done at the end of each year is equal to $34,650. Tel Company uses the straight-line method of depreciation for all of its assets. Based on the above information, what are the amounts shown in the balance sheet as at 31st December, Year 1?
A- Right-of-Use Asset: $29,737 and Lease Liability: $32,571 | ||
B-Right-of-Use Asset: $29,487 and Lease Liability: $24,650 | ||
C-Right-of-Use Asset: $25,987 and Lease Liability: $26,729 | ||
D- Right-of-Use Asset: $29,737 and Lease Liability: $26,729 |
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