Question:
On September 30, 2013, Ferguson Imports leased a warehouse. Terms of the lease require Ferguson to
make 10 annual lease payments of $55,000 with the first payment due immediately. Accounting standards
require the company to record a lease liability when recording this type of lease. Assuming an 8% interest
rate, at what amount should Ferguson record the lease liability on September 30, 2013, before the first
payment is made?
Answer:
PVAD = $55,000 (7.24689) = $398,579 = Liability
Present value of an annuity due of $1: n = 10, i = 8% (from Table 6)
On September 30, 2013, Ferguson Imports leased a warehouse. Terms of the lease require Ferguson to
make 10 annual lease payments of $55,000 with the first payment due immediately. Accounting standards
require the company to record a lease liability when recording this type of lease. Assuming an 8% interest
rate, at what amount should Ferguson record the lease liability on September 30, 2013, before the first
payment is made?
Answer:
PVAD = $55,000 (7.24689) = $398,579 = Liability
Present value of an annuity due of $1: n = 10, i = 8% (from Table 6)
