Jamborie leases a machine from Literati Leasing Inc. on January 1, Year 1. The lease terms include a $400,000 annual payment beginning January 1, Year 1. The machines fair value is $1,800,000 and the guarantied residual value is estimated at $120,000, which is less than the expected residual value. The useful life of the machine is nine years, and the lease term is seven years. The implicit rate of interest is 7% and is known by the company. The following present value factors are provided:

	Seven Years	Nine Years
Present value of $1 at 7%	0.6227	0.5439
Present value of an annuity due at 7%	5.7665	6.9713
Present value of an ordinary annuity at 7%	5.3893	6.5152

What is the value of the machine in the companys balance sheet at lease inception?

• A.

  $2,381,324

• B.

  $2,306,600

• C.

  $2,788,520

• D.

  $2,230,444