Essay
Incentive Industries
Incentive Industries enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $75,000 under a 5-year lease on December 20, 2018. Bumble provides Incentive Industries with a lease incentive in the amount of $6,000 to terminate another lease. The lease commences on January 1, 2019, and Incentive will return the automobile to Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Incentive made a lease payment of $10,000 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,000, due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 7% and is known by Incentive. Incentive incurs initial direct costs of $2,000.
-Assuming that this is classified as an operating lease, what is the amount of the lease liability at on January 1, 2019 before the lease payment?
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The lease liability is calculated as the...View Answer
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