Surplus Mining Company Has Leased a Machine from Craft Machinery

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000,and the life of the lease is eight years.It is estimated that the useful life of the machine is nine years.How would Surplus Mining record the acquisition of the machine?

A) The machine would be recorded as an asset with a cost of $48,000.
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year.
C) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for eight years.
D) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for nine years.

Correct Answer:

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