Francisco Leased Equipment from Julio on December 31, 2018

Francisco leased equipment from Julio on December 31, 2018. The lease is a 10-year lease with annual payments of $150,000 due on December 31 of each year beginning December 31, 2018. The present value of the lease payments is $1,020,000. Francisco's incremental borrowing rate is 12% for this type of lease. The implicit rate of 10% is known by the lessee. What should be the balance in Francisco lease liability at December 31, 2019?

A) $824,400.
B) $807,000.
C) $806,400.
D) $792,000.

Correct Answer:

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