Question

Suppose a company signs a three-year lease agreement. The lease payments have a present value of $55,000. Prior to signing the lease, the company had total assets of $530,000. The total assets after considering the present value of the lease payments will be $485,000.

A) True
B) False

Answer 1

The total assets after considering the present value of the lease payments will be $475,000, not $485,000.

Step-by-step explanation:

The question asks whether it is true or false that the total assets of a company will be $485,000 after considering the present value of lease payments. In order to answer this, we need to determine the present value of the lease payments and subtract it from the initial total assets. Given that the present value of the lease payments is $55,000, we subtract $55,000 from the initial total assets of $530,000, which gives us $475,000. Therefore, the statement is false. The total assets after considering the present value of the lease payments will be $475,000, not $485,000.