Respuesta :
Answer:
The balance reported as a liability by Dec 31, 2019 = $1,704,900
Explanation:
First, a portion of the question is missing, the full question is as follows
On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight years. The first payment of $450,000 was made on January 1, 2013. Remaining payments are made on December 31 each year, beginning with December 31, 2018. The equipment cost Packard Corporation $2,400,000. The present value of the minimum lease payments is $2,640,000. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, what will be the balance reported as a liability by Hewlitt in the December 31, 2019, balance sheet?
Solution
First, we know that the Present value of the minimum lease payment is $2,640,00. Hence, we calculate the balance reported as follows
January 1, 2018
Begining Balance = $2,640,000
Total Lease Payment = $450,000
Interest at 10% = (interest of this date is 0)
Hence, the principla to be repaid = $450,000
Finally, the Ending Balance = Begining Balance - Principal Repayment
= $2640,000 - $450,000 = $2,190,000
December 31, 2018
Begining Balance = $2,190,000
Total Lease Payment = $450,000
Interest at 10% = 0.10 x 2,190,000 = $219,000
Hence, the principla to be repaid = $450,000- $219,000 = $231,000
Finally, the Ending Balance = Begining Balance - Principal Repayment
= $2,190,000- $231,000= $1,959,000
December 31, 2019
Begining Balance =$1,959,000
Total Lease Payment = $450,000
Interest at 10% = 0.10 x $1,959,000= $195,900
Hence, the principla to be repaid = $450,000- $195,900= $254,100
Finally, the Ending Balance = Begining Balance - Principal Repayment
= $1,959,000- $254,100= $1,704,900
