Epson Distributing Leased a Machine for a Period of Eight

Epson Distributing leased a machine for a period of eight years, contracting to pay $200,000 at the beginning of the lease term on December 31, 2011, and $200,000 annually on December 31 for each of the next seven years. The present value of the eight rent payments over the lease term, appropriately discounted at 10 percent, is $1,174,000. On its December 31, 2012, balance sheet, Epson should report a liability under capital lease of

A) $871,400.
B) $876,600.
C) $974,000.
D) $1,091,400.

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