Question
Billy Joe Company leases a machine from Bobby Sue Corp. under an agreement which meets the criteria to be a finance lease for Billy Joe.
Billy Joe Company leases a machine from Bobby Sue Corp. under an agreement which meets the criteria to be a finance lease for Billy Joe. The six-year lease requires payment of $116,000 at the beginning of each year. The incremental borrowing rate for the lessee is 10%; the lessors implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Billy Joe should record a Right-Of-Use Asset at inception for:
a. $679,008.
b. $651,548.
c. $579,154.
d. $555,732.
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