Question: On January 1 2014 Babson Inc leased two automobiles for

On January 1, 2014, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make five annual payments of $13,000, beginning January 1, 2014. At the end of the lease term on December 31, 2018, Babson guarantees that the residual value of the automobiles will total $10,000. The lease qualifies as a capital lease. The interest rate implicit in the lease is 9%.

Compute Babson’s recorded capital lease liability immediately after the first required payment.

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  • CreatedSeptember 10, 2014
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