Metlock Leasing Company agrees to lease equipment to Bonita Corporation on January 1, 2020. The following information relates to the lease agreement.

1.The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

2.The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $713,000.

3.At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Bonita estimates that the expected residual value at the end of the lease term will be 45,000. Bonita amortizes all of its leased equipment on a straight-line basis.

4.The lease agreement requires equal annual rental payments, beginning on January 1, 2020.

5.The collectibility of the lease payments is probable.6.Metlock desires a 11% rate of return on its investments. Bonita's incremental borrowing rate is 12%, and the lessor's implicit rate is unknown.

(Assume the accounting period ends on December 31.)

(c) x Your answer is incorrect. Try again. Compute the value of the lease liability to the lessee. ( Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments 713000