Question

A company is deciding between two options: (1) purchase a piece of equipment for $10,000 or (2) lease the same piece of equipment for three years and then return the equipment to the owner. The lease payments are $182.53 per month and have a present value of $6,000. If the company decides to lease, for what amount would the leased asset be recorded at the beginning of the lease?
a) $10,000.
b) $6,000
c) $4,000.
d) $6,571.

Answer 1

Answer:

b) $6,000

Explanation:

The computation of the leased asset to be recorded at the beginning of the lease is shown below:

= Present value

= $6,000

In the case when the asset recognized under lease, so the present value would be determined

Therefore the same is to be considered

Hence, the correct option is b.

And, the rest of the options are incorrect