Question 1

Max Company leases a computer from Bill Corp. under an agreement, which meets the criteria to be a finance lease for max. The ten- year lease requires payment of $34,000 at the

beginning of each year, including $5,000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 15%; the lessor's implicitrate is 12% and is

known by the lessee. According to the accounting guidelines for leases, the lessee should record the leased asset at:

PV of Annuity Due of 1 for n= 10, i= 12% 6.32825

PV of Annuity Due of 1 for n= 10, 1= 15% 5.77158

a. $167.376

b. $183.519

c. $196,234

d. $215,161