Question
On January 2, 2021, Ivanhoe Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $162000 each, payable beginning January 2, 2021.
On January 2, 2021, Ivanhoe Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $162000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $159500 residual value of the asset at the end of the lease term. The expected value of the residual value is $57500. Bricks incremental borrowing rate is 10%, however it knows that Ivanhoes implicit interest rate is 8%. What journal entry would Brick Co. make at January 2, 2021 to record the lease?
PV Annuity Due | PV Ordinary Annuity | PV Single Sum | |
8%, 5 periods | 4.31213 | 3.99271 | 0.68058 |
10%, 5 periods | 4.16987 | 3.79079 | 0.62092 |
A
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B |
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C |
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D |
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