A company signed an operating lease agreement to use office space for 5 years. The company took possession and began to use the building on January 1, Year 1. Annual rent of $24,000 is due on the first day of each year. Assuming an implicit interest rate in the lease of 6%, the present value of the lease payments at the inception of the lease is $107,163. On December 31, Year 3, what amount should the company report as the lease liability balance on its balance sheet

$22,642

Explanation:

The amount of lease liability that will be reported in the balance sheet on December 31 year 3 can be calculated as follows

           Opening    Cash payment     Outstanding   Interest rate   Closing

Year 1    $107,163      $24,000            $83,163           $4990          $88,153

Year 2    $88,153       $24,000           $64,153           $3,849         $68,002

Year 3    $68,002      $24,000           $44,002         $2,640         $46,642

Year 4   $46,642       $24,000           $22,642         $1,358           $24,000

Year 5    $24,000     $24,000                  -                   -                       -        

Total liability = $46,642

Non curret = $46,642 - $24,000 =$22,642

The amount of lease liability that will be reported in the balance sheet on 31 December year 3 is $22,642

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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