Oak Co. leased equipment for its entire nine-year useful life,
agreeing to pay $50,000 at the start of the lease term on December
31, year 1, and $50,000 annually on each December 31 for
the next eight years. The present value on December 31, year 1,
of the nine lease payments over the lease term, using the rate
implicit in the lease which Oak knows to be 10%, was $316,500.
The December 31, year 1 present value of the lease payments
using Oak?s incremental borrowing rate of 12% was $298,500.
Oak made a timely second lease payment. What amount should
Oak report as capital lease liability in its December 31, year 2
balance sheet?

$350,000
$243,150
$228,320
$0

Answer rating: 100% (QA)

The detailed answer for the above question is provided below b This is a capital lease for the lesse... View the full answer