Question

number 3 in mc please how did they get 23,320 as answer.

Multiple Choice Questions 1. CDE leased equipment from HIJ on December 31, 20x11, for a 10-year period (also the useful life of the asset). Equal annual payments under the lease are $30,000 and are due on December 31 of each year. The first payment was made on December 31, 20x11, and the second payment was made on the next due date December 31, 20X12. The present value at December 31, 20x11, of the minimum lease payments over the lease term discounted at 10 percent (the implicit rate computed by HIJ and known by CDE) was $202.771. The lease is appropriately accounted for as a finance lease by CDE. What would be the interest expense on the lease liability for the fiscal year ended on December 31, 2012? A. $20,277 B. $17,772 C $30,000 D. $17,277 20277.1 3000

Answer 1

I guess there is some issue in framing of Question, None of the alternative's given in MCQ-Q3 is correct. Answer should be $12723 (Calculated below) Also, In Q2, it is stated that after the second payment was made, but $ 160,048 is not an option, we assumed that they are asking it prior to making the instalment but after the accrued interest calculation 1 Interest Expense on the Lease Liability for the year 31st Dec 2012 Present Value 202771 Less. First Instalment 30000 172771 Interest Expense @10% 17277 (Option D) Balance on 31st Dec 2012 Opening Balance Interest 172771 17277 190048 (Option C) 3 Current Portion of Long-Term Lease Liability Instalment 30000 Less. Interest 17277 12723

Amortisation Table - For reference Opening Balance Interest @10% Instalment Principal Payment Closing Balance 2,02,771 30,000 30,000 1,72,771 1,72,771 17,277 30,000 12,723 1,60,048 1,60,048 16,005 30,000 13,995 1,46,053 1,46,053 14,605 30,000 15,395 1,30,658 1,30,658 13,066 30,000 16,934 1,13,724 1,13,724 11,372 30,000 18,628 95,096 95,096 9,510 30,000 20,490 74,606 74,606 7,461 30,000 22,539 52,067 52,067 5,207 30,000 24,793 27,274 27,274 2,726 30,000 27,274