Carla Leasing Company agrees to lease equipment to Sarasota Corporation on January 1, 2020.

The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2020, is $760,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Sarasota estimates that the expected residual value at the end of the lease term will be 45,000. Sarasota amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. The collectibility of the lease payments is probable. Carla desires a 10% rate of return on its investments. Sarasotas incremental borrowing rate is 11%, and the lessors implicit rate is unknown.

Present value of minimum lease payments $ 732133 Suppose Sarasota expects the residual value at the end of the lease term to be $35,000 but still guarantees a residual of $45,000. Compute the value of the lease liability at lease commencement. Lease liability $ 736950