On Dec 31,2011, Burton, Inc. leased a machineru with a fair value of $840,000 from Cey Rentals Co. The agreement is a six year noncacelable lease requiring annual payments of $160,000 beginning De. 31, 2011. The lease is approriately accounted for by Burton as a capital lease. Burton s incremental borrowing rate is 11%. Burton knows the interest rate implicit in the lease payments is 10%.

On Dec 31,2011, Burton, Inc. leased a machineru with a fair value of $840,000 from Cey Rentals Co. The agreement is a six year noncacelable lease requiring annual payments of $160,000 beginning De. 31, 2011. The lease is approriately accounted for by Burton as a capital lease. Burton s incremental borrowing rate is 11%. Burton knows the interest rate implicit in the lease payments is 10%
The present value of annuity due of 1 years at 10% is 4.7908
The present value of an annuity due of 1 for 6 years at 11% is 4.6959
In its December 31,2011 balance sheet, Burton should report a lease liability of
a) $606,528.
b)$680,000.
c) $751,344.
d) $766,528.






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