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In: Accounting

On January 1, 2014 Lessee Company entered into a five-year lease, which required annual payments of...

On January 1, 2014 Lessee Company entered into a five-year lease, which required annual payments of $60,000. The first payment was due at the inception of the lease. The present value of the minimum lease payments to record the lease was $250,192, the applicable discount rate was 10%. Lessee Company treated the lease as a capital lease. What is the balance of lessee Company's lease liability as of December 31, 2014: Please select from the following:

A) $209,211

B) $275,211

C) $190, 192

D) $149,211

Solutions

Expert Solution

Lease Liability as on January 1, 2014

= Minimum Lease Payments

= $250,192

Annual Payment for the year 2014 paid on January 1, 2014 = $60,000

Since the payment is made at the inception of lease, the whole payment is attributed towards the repayment of pricipal (Lease Liability).

Lease Liability as of December 31, 2014

= Lease Liability as of January 1, 2014 - Annual payment made on January 1, 2014

= $250,192 - $60,000

= $190,192

Correct Answer: C) $190,192

ekkarill92 answered 2 years ago
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