Multiple Choice
Modesto,Inc.leased machinery with a fair value of $250,000 from Layton Machine Co.on December 31,2014.The contract is a six-year noncancelable lease with an implicit interest rate of 10 percent.The lease requires annual payments of $50,000 beginning December 31,2014.Modesto appropriately accounted for the lease as a capital lease.Modesto's incremental borrowing rate is 12 percent.Assuming the present value of an annuity due of 1 for 6 years at 10 percent is 4.7908 and the present value of an annuity due of 1 for 6 years at 12 percent is 4.6048,what is the lease liability that Modesto should report on the balance sheet at December 31,2014?
A) $189,540
B) $200,000
C) $230,240
D) $239,540
Correct Answer:
Verified
Correct Answer:
Verified
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