NEW QUESTION 545
Clifton Company leased a computer from Jan Corporation on January 1, 2000, for a 10-year period, the useful life of the asset. Equal rental payments of $5,000 are due on January 1 of each year. The first payment was made on January 1, 2000. The present value of the minimum lease payments over the lease term discounted at 10% was $33,795. The balance in Clifton’s liability account (including accrued interest) at December 31, 2000, should be:
Lease liability (December 31, 2000): = Acquisition cost – First lease payment interest for
2 000 = $33,795 – $5,000 + ([$33,795 – $5,000] x 10%) = $28,795 + $2,880 = $31,675