Question
On December 31, 2019, Crane Co. leased a machine from Catt, Inc. Pertinent information is as follows: Lease term 5-year Equal annual payments under the
On December 31, 2019, Crane Co. leased a machine from Catt, Inc. Pertinent information is as follows:
Lease term 5-year
Equal annual payments under the lease are $2,250,000 (including $103,000 annual executory costs) and are due on Dec. 31 of each year. The first payment was made on Dec. 31, 2019.
Catt's discount rate is 9%. Crane's discount rate is 12%.
Crane is aware of the discount rate Catt uses.
Oriole classifies this as a finance lease.
In its Dec. 31, 2020 balance sheet, Oriole would report lease liabilty of (Hint: the present value of an annuity due of 1 for % years at 9% is 4.23972; The present value of an annuity due of 1 for 5 years at 12% is 4.03735)
A: $6,852,679
B: $6,329,668
C: $6,955,679
D: $5,434,690
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