Exercise 21A-9 a-b (Part Level Submission)

Sunland Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The lease is for an8-year period and requires equal annual payments of $34,300at the beginning of each year. The first payment is received on January 1, 2017. Sunland had purchased the machine during 2016 for $160,000. Collectibility of lease payments by Sunland is probable. Sunland set the annual rental to ensure a6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sunland at the termination of the lease. Assume that Dexter Corporation does not know the rate implicit in the lease used by Sunland, and Dexter's incremental borrowing rate is 8%. In addition, assume that Dexter incurs initial direct costs of $10,000.

Click here to view the factor table.

(a)

Compute the amount of the lease liability and right-of-use asset for Dexter.