Problemon january 1 year 1 jang co signed a 7-year lease, Ask an Expert

Accounting

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On January 1, year 1, Jang Co. signed a 7-year lease for equipment having a 10-year economic life. The present value of the monthly lease payments equals 80% of the equipments's fair value. The lease agreement provides for neither a transfer of title to Jang nor a bargain purchase option. In its year 1 income statements, Jang should report

Rent expense equal to tye year 1 lease payments.
Rent expense equal to the year 1 lease payments minus interest.
Lease amortization equal to one-tenth of the equipment's fair value.
Lease amortization equal to one-seventh of 80% of the equipment's fair value.

Note: Please show the work not just the answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164581

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