Robbins, Inc. leased a machine from Ready Leasing Co.

The lease qualifies as a capital lease and requires ten annual payments of $10,000 beginning immediately. The lease specifies an interest rate of 12% and a purchase option of

$10,000 at the end of the tenth year, even though the machine’s estimated value on that date is $20,000. Robbins’

incremental borrowing rate is 14%.

The present value of an annuity due of one at 12% for ten years is 6.328 14% for ten years is 5.946 The present value of one at 12% for ten years is .322 14% for ten years is .270 What amount should Robbins record as lease liability at the beginning of the lease term?

a. $62,160

b. $64,860

c. $66,500

d. $69,720