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On December 31, 2021, Cullumber, Inc. leased machinery with a fair value of $2175000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease
On December 31, 2021, Cullumber, Inc. leased machinery with a fair value of $2175000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease requiring annual payments of $420000 beginning December 31, 2021. The lease is appropriately accounted for by Cullumber as a finance lease. Cullumber's incremental borrowing rate is 11%. Cullumber 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, Cullumber should report a lease liability of $1972278. $2012136. $1755000. $1592136
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