Question

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

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.

 

 

Solutions

Expert Solution

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)
     

Junaid answered 2 years ago
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