Exhibit 21-2 On January 1, 2010, Maury Company leased equipment, signing a five-year lease that requires annual lease payments of $20, 000.The lease qualifies as a capital lease.The payments are made at year-end, and the first payment will be made at December 31, 2010.In addition, Maury guarantees the residual value to be $10, 000 at the end of the lease term.Maury correctly uses the lessor's implicit interest rate, which is 12%.The present value factors for five periods at 12% are as follows:
$\begin{array}{llr}
\text {Present value of $ \$ 1 $ } &0.567427\
\text { Present value of ordinary annuity of $ \$ 1 $ } &3.604776\
\end{array}$

- Refer to Exhibit 21-2.What would be the debit to Leased Equipment under Capital Leases on January 1, 2010? (Round amounts to the nearest dollar.)

Question

Exhibit 21-2 On January 1, 2010, Maury Company leased equipment, signing a five-year lease that requires annual lease payments of $20, 000.The lease qualifies as a capital lease.The payments are made at year-end, and the first payment will be made at December 31, 2010.In addition, Maury guarantees the residual value to be $10, 000 at the end of the lease term.Maury correctly uses the lessor's implicit interest rate, which is 12%.The present value factors for five periods at 12% are as follows:
$\begin{array}{llr}
  \text {Present value of $ \$ 1 $  } &0.567427\
 \text { Present value of ordinary annuity of $ \$ 1 $ } &3.604776\
\end{array}$

- Refer to Exhibit 21-2.What would be the debit to Leased Equipment under Capital Leases on January 1, 2010? (Round amounts to the nearest dollar.)

Quizplus · Accepted Answer

The debit to Leased Equipment under Capital Leases on January 1, 2010, is calculated by adding the present value of the lease payments and the present value of the guaranteed residual value. The present value of the lease payments is $20,000 * 3.604776 = $72,096 (rounded to the nearest dollar). The present value of the guaranteed residual value is $10,000 * 0.567427 = $5,674 (rounded to the nearest dollar). Adding these two amounts gives $72,096 + $5,674 = $77,770.

Exhibit 21-2 on January 1, 2010, Maury Company Leased Equipment