East Company leased a new machine from North Company on May 1, 2010 under a lease with the following information:
Lease Term 10 years
Annual rental payable at the beginning of each lease year $40,000
Estimated life of machine 12 years
Implicit interest rate 14%
Present value of annuity of $1 in advance for 10 periods at 14% 5.95
Present value of $1 for 10 periods at 14%
East has the option to purchase the machine at the end of the lease by paying $50,000, which approximates the expected value of the machine on the option exercise date. On May 1, 2010, East should record as capitalized leased asset of 
a. $251,500
b. $238.000
c. $224,500
d. 198,000 

  • CreatedJuly 26, 2013
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