Question
Astroid Co. sells computer systems. Astroid leases computers to TwoStar Company on January 1, 2021. The manufacturing cost of the computers was $12 million. This
Astroid Co. sells computer systems. Astroid leases computers to TwoStar Company on January 1, 2021. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2021: $20 million. What is the outstanding balance of the lease liability in TwoStar's June 30, 2021, balance sheet?
A) $15,943,154. B) $17,533,246. C) $21,000,000. D) None of these answer choices is correct.
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