Answer:
Step-by-step explanation:
The objective of this question is to find the present value of the lease payment and record the lease on June 30, Year 1.
Given that:
The lease requires quarterly payment.
Borrowing rate = 6%
∴
The quarterly interest rate = [tex]6\% \times \dfrac{1}{4}[/tex]
The quarterly interest rate = 1.50%
Now, the present value for the lease payment can be calculated as:
= $29,122.87 × PV(1.5%,20)
= $29,122.87 × 17.16864
= $500000.071
≅ $500,000 (to the nearest whole dollar amount)
The Journal entries:
No. Date Account title Debit Credit
1 June 30 Lease assets $500,000
Lease Payable $500,000
(To record lease
Payable)
