On January 1, 2018, Packard Corporation Leased Equipment to Hewlitt

On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight years. The first payment of $450,000 was made on January 1, 2018. Remaining payments are made on December 31 each year, beginning with December 31, 2018. The equipment cost Packard Corporation $2,400,000. The present value of the lease payments is $2,640,000. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, what will be the balance reported as a liability by Hewlitt in the December 31, 2019, balance sheet?

A) $1,950,000.
B) $1,509,000.
C) $1,959,000.
D) $1,704,900.

Correct Answer:

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