Robbins, Inc. leased a machine from Ready Leasing Co. The lease qualifies as a capital lease and
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Question:
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?
$62,160
$64,860
$66,500
$69,720
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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