MacKenzie Corporation is considering leasing a new asset. The lease would run for eight years and require

Question:

MacKenzie is considering leasing a new asset. The lease would run for eight years and require eight beginning-of-year payments of $100,000 each. If MacKenzie capitalizes this lease for financial reporting purposes at a 10 percent rate, what asset amount will be reported initially on its balance sheet? What liability amount will be reported on its balance sheet? (Remember, lease payments are made at the beginning of each year, making them an due.)

Annuity
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