Question
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement calls for annual payments in the amount of $17,500
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement calls for annual payments in the amount of $17,500 on December 31 of each year beginning on December 31, 2018. Rumsfeld has the option to purchase the machine on December 31, 2021, for $21,500 when its fair value is expected to be $31,500. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 8%. n/i PV of $1 PV, ordinary annuity PV, annuity due 1 period, 8% 0.92593 0.92593 1.00000 2 periods, 8% 0.85734 1.78326 1.92593 3 periods, 8% 0.79383 2.57710 2.78326 Required: 1. Calculate the amount to be recorded as a right-of-use asset and the associated lease liability. 2. Prepare an amortization schedule for this lease.
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