Question

If you used a financial calculator or TI-84, could you please give me the steps?

On December 31, 20X5, Day Co. leased a new machine from Parr with the following pertinent information: 6 years $50.000 Lease term Annual rental payable at beginning of each year Useful life of machine Day's incremental borrowing rate Implicit interest rate in lease (known by Day) 8 years 15% 12% Present value of an annuity of one in advance for six periods at: 12% 15% 4.61 4.35 The lease is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr's accounting records is $375,500. At the beginning of the lease term, Day should record a lease liability of $230,500. $375,500. $0. $217,500.

Answer 1

Annual Rental payment	50000
X Present value an annuity of $1 in advance factor 12%	4.61
Day should record a lease liability of	230500
Option A $230,500 is correct

The interest rate to be used is lower of 15% or 12% as implicit rate in lease is known by lessee

The calculation does not require any financial calculator or factor tables.The PV factors are already provided in question.

Simply we need to multiply Annual Rental by PV factor given at 12%