On Sep. 30, 2018, Chamizal Corp. leased a warehouse. Terms of the lease require Chamizal to...
On Sep. 30, 2018, Chamizal Corp. leased a warehouse. Terms of the lease require Chamizal to a make 13 annual lease payments of $90,000 with the first payment due immediately. Accounting standards require the company to record a lease liability when recording this type of lease. Assume a 6% interest rate. What amount should Chamizal record the lease liability for on September 30, 2018, before the first payment is made?
Homework Answers
Solution:
Lease liability to be recorded on September 30 before first payment is made = Present value of minimum lease payments
= $90,000 * Cumulative PV factor at 6% for 13 periods of annuity due
= $90,000 * 9.38384 = $844,546
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