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Benton, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at lease inception.
| Benton, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the | ||||||||||
| first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has | ||||||||||
| a 4 year useful life and no salvage value. Benton, Inc.s incremental borrowing rate is 10% and the rate implicit in the lease (which is | ||||||||||
| known by Benton, Inc.) is 8%. Assuming that this lease is properly classified as a finance lease, what is the amount of Lease Liability | ||||||||||
| reduction recorded in first year after the lease inception. | ||||||||||
| PV Annuity Due | PV Ordinary Annuity | |||||||||
| 8%, 4 periods | 3.5771 | 3.31213 | ||||||||
| 10%, 4 periods | 3.48685 | 3.16986 | ||||||||
| a. | $344,152 | |||||||||
| b. | $245,666 | |||||||||
| c. | $252,960 | |||||||||
| d. | $273,199 | |||||||||
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