In: Accounting
On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate is 8%.
Required:
1. Calculate the present value of the lease payments. Round to the nearest whole dollar. Use a financial calculator or Excel.
2. Record the lease on June 1, 2021.
Part 1.
Rate of interest | 0.67% | 8%/12 |
No of periods | 24 | 12*2 |
Monthly payments | $3,618,18 | |
Future value | 0 | |
Present value | $ 80,000 | PV(B1, B2, -B3, B4, 0) |
Part 2.
Date | Journal Entry | Debit | Credit |
01-Jun-21 | Lease Asset | $80,000 | |
To Lease Payable | $ 80,000 |
1.
Rate of interest | 0.67% | 8%/12 |
No of periods | 24 | 12*2 |
Monthly payments | $3,618,18 | |
Future value | 0 | |
Present value | $ 80,000 | PV(B1, B2, -B3, B4, 0) |