Question

In: Accounting

Warrior Inc. leased a commercial generator from Portland Inc. on January 1, 2021 under a 2-year...

Warrior Inc. leased a commercial generator from Portland Inc. on January 1, 2021 under a 2-year operating lease. Quarterly payments of $21,000 are due at the beginning of each quarter with the first payment due on January 1, 2021. Portland purchased the generator from Magnum Corp. at a cost of $256,000, which is also its fair value. The economic life of the generator is 5 years and the interest rate implicit in the lease is 8%. Warrior records amortization every quarter.

What is the balance in the lease payable at July 1, 2021?

A.

$104,367
B.

$95,349
C.

$117,630
D.

$98,983

Solutions

Expert Solution

Period Lease Payment PV Factor @2% Present value
1                 21,000                           1             21,000
2                 21,000              0.98039             20,588
3                 21,000              0.96117             20,185
4                 21,000              0.94232             19,789
5                 21,000              0.92385             19,401
6                 21,000              0.90573             19,020
7                 21,000              0.88797             18,647
8                 21,000              0.87056             18,282
Total             168,000          156,912
Lease Liability on January 1,2021 156,912
Less: Payment on January 1,2021      21,000
Balance on January 1,2021 135,912
Interest Expense for 1st quarter        2,718 =135912*2%
Amount allocated to lease liability of April 1,2021 Payment      18,282 =21000-2718
Balance of lease liability after April 1,2021 Payment 117,630 =135912-18282
Interest Expense for 1st quarter        2,353 =117630*2%
Amount allocated to lease liability of July 1,2021 Payment      18,647 =21000-2353
Balance of lease liability after July 1,2021 Payment $ 98,983 =117630-18647
Correct answer is option D .

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

At January 1, 2021, Oslo, Inc. leased mining equipment from Stockholm Leasing Inc under a nine-year...
At January 1, 2021, Oslo, Inc. leased mining equipment from Stockholm Leasing Inc under a nine-year lease agreement. The lease agreement specifies annual payments of $79,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Stockholm Leasing at a cost of $565,500 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life....
A. On January 1, 2021, Jack leased office space from Luna under a 20-year operating lease...
A. On January 1, 2021, Jack leased office space from Luna under a 20-year operating lease agreement. Luna’s borrowing rate is 5%. The lease calls for annual lease payments of $10,000 on January 1 of each year. Record all journal entries related to the lease for 2021, 2022, and 2023 for both Luna and Jack.
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
On January 1, 2021, Burrito Bill's leased restaurant equipment from Oval Corporation under a nine-year lease...
On January 1, 2021, Burrito Bill's leased restaurant equipment from Oval Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $75,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Oval at a cost of $540,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $33,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $252,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $30,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $225,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Late leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Late leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $27,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $198,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $29,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT