Question
In: Finance
The Harris Company is the lessee on a four-year lease with the following payments at the...
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 17,000 Year 2: $ 22,000 Year 3: $ 27,000 Year 4: $ 32,000 An appropriate discount rate is 7 percentage, yielding a present value of $81,556. 1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? 2. If the lease is an operating lease, what will be the initial value of the lease liability? 3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?
Solutions
Expert Solution
Answer :
1) Here,
Initial value of the right-of-use asset = Present value of lease payments
= $81,556
2) Here,
Initial value of lease liability = Present value of lease payments
= $81,556
3) Here,
Lease expense = [ $17,000 + $22,000 + $27,000 + $32,000 ] / 4
= $24,500
jeff jeffy answered 2 years agoRelated Solutions
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