Robbins, Inc. leased a machine from Ready Leasing Company. The lease qualifies as a capital lease and requires 10 annual payments of \($10,000\) beginning immediately. The lease specifies an interest rate of 12% (the lessor’s return) and a purchase option of \($10,000\) at the end of the 10th year even though the machine's estimated value on that date is \($20,000\). Robbins’ incremental borrowing rate is 14%. The present value of an annuity paid at the start of each period is:

Required:
Compute the amount that Robbins should record as the lease liability at the beginning of the lease term.

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12% for 10 years is 6.328 14% for 10 years is 5.946 The present value of $1 is: 12% for 10 years is 0.322 14% for 10 years is 0.270