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2 years ago

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Business

1 answer:

kobusy [5.1K]2 years ago

4 0

The balance of lease liability on December 31, 2019, is equal to €31,592.39.

Option A is the correct answer.

<h3>What is a lease?</h3>

A lease is a contract where the owner of the asset permits the other party to utilize the asset for a specified period of time. The owner receives some consideration for that use.

Given values:

Yearly rental payment: € 9,538.39

PV annuity factor of 8% at 4 years: 3.31213

Computation of lease liability balance:

$\rm\ Balance \rm\ of \rm\ Lease \rm\ Liability= \rm\ Yearly \rm\ Rentals \times\ \rm\ PV \rm\ Annuity \rm\ factor\\\rm\ Balance \rm\ of \rm\ Lease \rm\ Liability=\ 9,538.39 \times\ 3.31213\\\rm\ Balance \rm\ of \rm\ Lease \rm\ Liability=31,592.39$

Therefore, on December 31, 2019, the amount of lease liability comes our to be € 31,592.39.

Learn more about the lease rentals in the related link:

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2. Computation of working capital with contingent liabilities of $250,000 in the notes to the financial statements:

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= $530,000 - 362,000 = $168,000

c) Contingent liabilities are probable future financial obligations. They become probable to occur in the future as a result of some past events. If it is probable that they would occur and the amount involved can be reasonably estimated, they are recognized in the accounts. If the amount cannot be ascertained, they are presented as notes to the financial statements.

d) Current liabilities are the financial obligations owed by an entity to others as a result of past transactions, and their payment or settlement is usually due within the next 12 months.

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