Question

In: Accounting

On December 31, 2021, Blossom Corporation leased a ship from Fort Company for an eight-year period...

On December 31, 2021, Blossom Corporation leased a ship from Fort Company for an eight-year period expiring December 30, 2029. Equal annual payments of $420000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Blossom‘s books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 9% is $2533839. Assuming all payments are made on time, the amount that should be reported by Blossom Corporation as the total liability for finance leases on its December 31, 2022 balance sheet is

$2113839.
$2533839.
$1884085.
$2520000.

Solutions

Expert Solution

Option , $1884085

Workings:

Total liability for finance leases on its December 31, 2022 balance sheet = (2533839-420000)*1.09 - 420000

= 1884084.51 or 1884085

ekkarill92 answered 2 years ago
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