Question
Alt Corporation enters into an agreement with Yates Rentals Co. on December 31, 2011 for the purpose of leasing a machine to be used in
Alt Corporation enters into an agreement with Yates Rentals Co. on December 31, 2011 for the purpose of leasing a machine to be used in its manufacturing operations. The following data pertain to the agreement:
The term of the noncancelable lease is 3 years with no renewal option. Payments of $155,213 are due on December 31 of each year.
The fair value of the machine on December 31, 2011, is $400,000. The machine has a remaining economic life of 10 years, with no salvage value.
Alt depreciates all machinery it owns on a straight-line basis.
Alt's incremental borrowing rate is 10% per year. Alt does not have knowledge of the 8% implicit rate used by Yates.
What is Alt's Lease Liability at the end of 2011?
- 424,591
- 269,378
- 385,991
- 431,998
- none of the above.
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