January 1, 20X1, Sans Serif Publishers, Inc., a computer services and printing firm, leased a color copier from CompuDec Corporation. The lease agreement specifies four annual payments of $100,000 beginning January 1, 20X1, the inception of the lease, and at each January 1 through 20X4. The useful life of the copier is estimated to be six years and depreciated on a straight-line basis. Before deciding to lease, Sans Serif considered purchasing the copier for its cash price of $479,079. If funds were borrowed to buy the copier, the interest rate would have been 10%. If Sans Serif uses US GAAP How should this lease be classified? What amounts of lease asset and lease liability are reported at December 31, 20X1? What amount of expenses are incurred due to this lease for the year ended at December 31, 20X1?
January 1, 20X1, Sans Serif Publishers, Inc., a computer services and printing firm, leased a color copier from CompuDec Corporation. The lease agreement specifies four annual payments of $100,000 beginning January 1, 20X1, the inception of the lease, and at each January 1 through 20X4. The useful life of the copier is estimated to be six years and depreciated on a straight-line basis. Before deciding to lease, Sans Serif considered purchasing the copier for its cash price of $479,079. If funds were borrowed to buy the copier, the interest rate would have been 10%.
If Sans Serif uses US GAAP
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How should this lease be classified?
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What amounts of lease asset and lease liability are reported at December 31, 20X1?
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What amount of expenses are incurred due to this lease for the year ended at December 31, 20X1?
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