Reference no: EM132869079

On January 1, 2020, Stacy Company entered into a lease of an office building with the following information: Annual lease payment every December 31 300,000 Lease term 4 years Useful life of the building 15 years Implicit rate in the lease 8% PV of an ordinary annuity of 1 at 8% for 4 periods 3.312 The lease contained an option for the lessee to extend for another 4 years. At the commencement date, the exercise of the extension option is not reasonably certain. However, after two years on January 1, 2022, the lessee decided to extend the lease for another 4 years with the following information: New annual lease payment every December 31 500,000 New implicit rate 6% PV of an ordinary annuity of 1 at 6% for 4 periods 3.465 PV of 1 at 6% for 2 periods 0.89 PV of an ordinary annuity of 1 at 6% for 2 periods 1.833

Question 1: What is the lease liability on December 31, 2021?

A. 534,935 B. 600,000 C. 773,088 D. 993,600

Question 2: What is the present value of the lease payment of the remaining old lease term due to the extension on January 1, 2022?

A. 500,000 B. 534,935 C. 549,900 D. 916,500

Question 3: What is the present value of the lease payment for the new lease term on January 1, 2022?

A. 925,155 B. 1,541,925 C. 1,732,500 D. 2,000,000

Question 4: What is the increase in the lease liability to be recognized on January 1, 2022?

A. 1,541,925 B. 1,556,890 C. 2,091,825 D. 2,400,000

Question 5: What is the new carrying amount of the right of use asset on January 1, 2022?

A. 496,800 B. 1,556,890 C. 2,053,690 D. 3,000,000