The present value at december 31 2013 of the ten lease, Ask an Expert

Accounting

On December 31, 2014, Pacific Rail Corporation leased a train car from Southern Transportation Company for a ten year period expiring December 30, 2024. Equal annual payments of $160,000 are due on December 31 of each year, beginning with December 31, 2014. The lease is properly classified as a capital lease on Pacific Rail's books. The present value at December 31, 2013 of the ten lease payments over the lease term discounted at 8% is $1,159,502. Assuming the first payment is made on time, the amount that should be reported by Pacific Rail Corporation as the lease liability on its December 31, 2014 balance sheet is:

a) $1,440,000

b) $1,159,502

c) $1,066,742

d) $999,502

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M947438

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