Question
Old Raritan Lodge leased a type of nonspecialized equipment for use in its hotel from Off Banks Equipment Co.on January 1, 2019. The 10-year lease
Old Raritan Lodge leased a type of nonspecialized equipment for use in its hotel from Off Banks Equipment Co.on January 1, 2019. The 10-year lease requires lease payments of $9,500, beginning on January 1, 2019, and at each December 31 thereafter through 2027. The equipment is estimated to have a 10-year life, is depreciated on the straight-line basis and will have a $2,000 residual value at the end of the lease term on December 31, 2028, which is guaranteed by Old Raritan. The lessors implicit rate, which is known to the lessee is 7%. Old Raritans incremental borrowing rate is 8%. Initial direct costs of $2,500 are incurred on January 1, 2019. Righteous Leasing acquired the asset just prior to the lease term at a cost of $64,012. The collection of all lease payments is reasonably assured.
What is the amount of the lease liability recorded by Nice at the lease's commencement? Round to nearest
PV Annuity Due PV Ordinary Annuity PV Single Sum
8%, 10 periods 7.24689 6.71008 0.46319
7%, 10 periods 7.51523 7.02358 0.50835
a.
$72,412
b.
$22,500
c.
$74,912
d.
$67,741
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