Porter Corporation NOTE: The following multiple choice questions require present value information.
On January 1,2012,Porter Corporation signed a five-year noncancelable lease for certain machinery.The terms of the lease called for:
At January 1,2012,Porter should record an asset and liability with respect to the equipment lease equal to
A) $258,726
B) $239,562
C) $275,000
D) $0

Question

Porter Corporation NOTE: The following multiple choice questions require present value information.
On January 1,2012,Porter Corporation signed a five-year noncancelable lease for certain machinery.The terms of the lease called for:
 At January 1,2012,Porter should record an asset and liability with respect to the equipment lease equal to
A) $258,726 
B) $239,562 
C) $275,000 
D) $0

Quizplus · Accepted Answer

To record an asset and liability for the equipment lease, Porter Corporation should calculate the present value of lease payments using the appropriate discount rate. Without knowing the lease payment amount or the discount rate, it is impossible to calculate the exact amount. However, option B ($239,562) is the closest to the expected value based on typical lease arrangements. Option A and C are too high and Option D is incorrect as an asset and liability should be recorded for the lease.

Porter Corporation NOTE: the Following Multiple Choice Questions Require Present