Question

BBB Leasing purchased a machine for $280,000 and leased it to Jack Tupp Auto Repair on January 1, 2021. Lease description: Quarterly rental payments $16,427 at beginning of each period Lease term 5 years (20 quarters) No residual value; no BPO Economic life of machine 5 years Implicit interest rate 7% Fair value of asset $280,000 What is the balance in the lease payable account after the April 1, 2021, lease payment

Answer 1

Answer: $251758.53

Explanation:

Based on the information given in the question,

Total lease liability = $280,000

Then, the balance in the lease payable account when the first lease payment takes place on January 1, 2021 will be:

= $280,000 - $16,427

= $263573

The, the interest that is included in the lease payment that's made on April 1, 2021 Will be:

= $263573 x 7% x 1/4

= $4612.53

Then, the principal amount that's included in the lease payment made on April 1, 2021 will be:

= $16,427 - $4612.53

= $11814.47

Therefore, the balance in the lease payable account after the April 1, 2021, lease payment will be:

= $263573 - $11814.47

= $251758.53