Question
Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are
Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are $370000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Martinez Equipment Leasing and known to Cullumber Healthcare is 8%. Cullumbers incremental borrowing rate is 12%. The cost of the equipment on Martinez Equipment Leasing accounting records was $820000. Assuming that the lease is appropriately recorded as an operating lease at what amount is the lease recorded on Cullumber Healthcare Systems books on January 1, 2025?
(a) $1323537
(b) $1480000
(c) $789167
(d) No entry to record an operating lease
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