On December 31, 2021, Crane, Inc. leased machinery with a fair value of $2125000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease requiring annual payments of $410000 beginning December 31, 2021. The lease is appropriately accounted for by Crane as a finance lease. Crane’s incremental borrowing rate is 11%. Crane knows the interest rate implicit in the lease payments is 10%.

The present value of an annuity due of 1 for 6 years at 10% is 4.7908.

The present value of an annuity due of 1 for 6 years at 11% is 4.69590.

In its December 31, 2021 balance sheet, Crane should report a lease liability of

(A) $1964228.

(B) $1554228.

(C) $1715000.

(D) $1925319.

2) Which of the following is not a critertion for a lease to be recorded as a finance lease?

a) There is a bargain price option.

b) The lease is non cancelable.

c) Lease payments are foxed over the lease term, there are no variable lease payments

d) There is a transfer ownership of the asset.