Use Table 1 and Table 2 to calculate present value answers. Rigby Corporation ha
ID: 2529653 • Letter: U
Question
Use Table 1 and Table 2 to calculate present value answers. Rigby Corporation has leased a piece of equipment that has a useful life of 12 years. This capital lease requires payments of $86,000 per year for 12 years. Rigby currently is able to borrow money at a long-term interest rate of 15 percent. Round your answers to the nearest dollar.
1. Calculate the present value of the lease agreement.
2. Prepare the journal entry to record the lease agreement.
3. Prepare the journal entry to record depreciation of the equipment for the first year using the straight-line method.
4. Prepare the journal entries to record the lease payments for the first two years. If an amount box does not require an entry, leave it blank.
Explanation / Answer
1.
Note: Please check the number of decimal places for the PV factor in the tables provided with the question and use accordingly since the same have not been posted with the question.
2.
Working:
Lease Payment Amount PVFactor (i=15%, n=12) Present value of lease payments 86000 x 5.421 = 466206
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