Present value of the monthly lease payments equals

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Reference no: EM13751820

On January 1, year 1, Jang Co. signed a 7-year lease for equipment having a 10-year economic life. The present value of the monthly lease payments equals 80% of the equipments’ fair value. The lease agreement provides for neither a transfer of title to Jang nor a bargain purchase option. In its year 1 income statements, Jang should report

a) Rent expense equal to tye year 1 lease payments.

b) Rent expense equal to the year 1 lease payments minus interest.

c) Lease amortization equal to one-tenth of the equipment's fair value.

d) Lease amortization equal to one-seventh of 80% of the equipment's fair value.

Reference no: EM13751820

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