A lessee capitalized a lease with a 1/1/x1 inception and which required annual lease payments of $5,000 to be paid each December 31 beginning 12/31/x1.The lessee is to pay an additional $200 each December 31 for maintenance and insurance for the year ending on that date.The last lease payment is due 12/31/x6, on which date the title to the asset transfers to the lessee.The asset is expected to be used by the lessee until 12/31/x9 at which time the asset will have no residual value.What is the total expense related to the lease recognized by the lessee in 20x4? Both lessor and lessee use 10%.

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Quizplus · Accepted Answer

The total expense related to the lease recognized by the lessee in 20x4 is $4,797. This is calculated as follows:Lease payment for 20x4 = $5,000Maintenance and insurance for 20x4 = $200Interest on lease liability (10% x $45,976) = $4,598Amortization of right-of-use asset ($50,000 x 1/5) = $10,000Total expense = $4,797

A Lessee Capitalized a Lease with a 1/1/x1 Inception and Which