Leased Asset Hopper Corporation signed a ten-year capital lease on January 1, 2010. The lease requires annual payments of $8,000 every December 31.

Required 1. Assuming an interest rate of 9%, calculate the present value of the minimum lease payments.

2. Explain why the value of the leased asset and the accompanying lease obligation are not reported on the balance sheet initially at $80,000.

AppendixLO1