PROBLEM IV On December 31, 2008, Mendez, Inc. leased machinery with a fair value of $840,000 from Cey Rentals Co. The agreement is a six-year noncancelable lease requiring annual payments of $160,000 beginning December 31,2008. The lease is appropriately accounted for by Mendez as a Finance lease. Mendez's incremental borrowing rate is 11%. Mendez 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 1 1% is 4.6959. Required : Determine the amount of lease liability that Mendez should report in its December 31, 2008 balance sheet. PROBLEM V