Nace Manufacturing Company leased a piece of nonspecialized equipment for use in its operations from Righteous Leasing on January 1, 2023. The 10 year lease requires lease payments of $6000, beginning on January 1, 2023, and at each December 31 thereafter through 2031. The equipment is estimated to have a 10 year life, is depreciated on the straight-line basis and will have no residual value at the end of the lease term. Nace's incremental borrowing rate is 10%. Initial direct costs of $1100 are incurred by the lessee on January 1, 2023. Righteous Leasing acquired the asset just prior to the lease term at a cost of $41,608. Collection of all lease payments is reasonably assured.What is the reduction in the lease liability recorded with the first and second lease payments, respectively? Group of answer choices $6000; $2545 $4165; $4165 $4055; $3650 $36,499; $2350
Nace Manufacturing Company leased a piece of nonspecialized equipment for use in its operations from Righteous Leasing on January 1, 2023. The 10 year lease requires lease payments of $6000, beginning on January 1, 2023, and at each December 31 thereafter through 2031. The equipment is estimated to have a 10 year life, is depreciated on the straight-line basis and will have no residual value at the end of the lease term. Nace's incremental borrowing rate is 10%. Initial direct costs of $1100 are incurred by the lessee on January 1, 2023. Righteous Leasing acquired the asset just prior to the lease term at a cost of $41,608. Collection of all lease payments is reasonably assured.What is the reduction in the lease liability recorded with the first and second lease payments, respectively? Group of answer choices $6000; $2545 $4165; $4165 $4055; $3650 $36,499; $2350
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Nace Manufacturing Company leased a piece of nonspecialized equipment for use in its operations from Righteous Leasing on January 1, 2023. The 10 year lease requires lease payments of $6000, beginning on January 1, 2023, and at each December 31 thereafter through 2031. The equipment is estimated to have a 10 year life, is depreciated on the straight-line basis and will have no residual value at the end of the lease term. Nace's incremental borrowing rate is 10%. Initial direct costs of $1100 are incurred by the lessee on January 1, 2023. Righteous Leasing acquired the asset just prior to the lease term at a cost of $41,608. Collection of all lease payments is reasonably assured.
What is the reduction in the lease liability recorded with the first and second lease payments, respectively?
What is the reduction in the lease liability recorded with the first and second lease payments, respectively?
Group of answer choices
$6000; $2545
$4165; $4165
$4055; $3650
$36,499; $2350
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