Question
On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight years. The first payment of $450,000 was made on
On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight years. The first payment of $450,000 was made on January 1, 2018. Remaining payments are made on December 31 each year, beginning with December 31, 2018. The equipment cost Packard Corporation $2,400,000. The present value of the lease payments is $2,640,788. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, what will be the balance reported as a liability by Hewlitt in the December 31, 2019, balance sheet?
a- $1,950,867
b- $1,509,854
c- $1,959,867
d- $1,705,854
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