At the beginnig of current year, East Company leased a new machine from North Company with the following information: Annual rental payable at beginning of each lease year 4000,000 Lease Term 10 years Useful life of machine 12 years Implicit interest rate 14% Present value of an annuity of 1 in advance for 10 periods at 14% 5.95 Present value of 1 for 10 periods at 14% 0.27 East company had the option to purchase the machine upon the expirtation of the lease term by paying P500,000. The purchase option is reasoably certain to be exercised. What amount should East Company record as initial cost of the right of use asset? a. 2,515,000 b. 2,380,000 c. 2,245,000 d. 1,980,000
At the beginnig of current year, East Company leased a new machine from North Company with the following information:
Annual rental payable at beginning of each lease year 4000,000
Lease Term 10 years
Useful life of machine 12 years
Implicit interest rate 14%
Present value of an annuity of 1 in advance for 10 periods at 14% 5.95
Present value of 1 for 10 periods at 14% 0.27
East company had the option to purchase the machine upon the expirtation of the lease term by paying P500,000. The purchase option is reasoably certain to be exercised.
What amount should East Company record as initial cost of the right of use asset?
a. 2,515,000
b. 2,380,000
c. 2,245,000
d. 1,980,000
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