Question
On December 31, 2000, Reilly Co. leased a machine from Bass, Inc. for a five-year period. Equal annual payments under the noncancelable lease are $315,000
On December 31, 2000, Reilly Co. leased a machine from Bass, Inc. for a five-year period. Equal annual payments under the noncancelable lease are $315,000 (including $15,000 annual executory costs) and are due on December 31 of each year. The first payment was made on December 31, 2000, and the second payment was made on December 31, 2001. The present value of minimum lease payments at the inception of the lease (prior to the first annual payment) was $1,256,000. The lease is appropriately accounted for as a capital lease by Reilly. In its December 31, 2001 balance sheet, Reilly should report a lease liability of?
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