Reference no: EM132831863
Question - Lessee Company leased a machinery on January 1, 2017 with the following information:
Annual rental payable at the end of each year 1,000,000
Residual value guarantee 500,000
Payment to lessor to obtain a long-term lease 300,000
Cost of dismantling and restoring the asset as required by contract at present value 390,000
Annual executory cost paid by lessee 50,000
Lease term 4 years
Useful life of machinery 8 years
Implicit interest rate 10%
PV of an ordinary annuity of 1 at 10% for 4 periods 3.17
PV of 1 at 10% for 4 periods 0.68
Required -
1. What is the initial lease liability on January 1, 2017?
2. What is the cost of right of use asset?
3. What is the depreciation expense for 2018?
4. What is the lease liability on December 31, 2017?
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