Question
Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment
Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million. The lease agreement between SuperByte and Laguna Madre had the follow terms: 1. The lease is noncancellable. 2. The lease has no residual value or bargain purchase option. 3. The lease term is 8 years; payments are made semiannually. 4. Depreciation is recorded each December 31 using the straight-line approach. 5. The economic life of the equipment is 8 years. 6. The lessee's incremental borrowing rate and the implicit interest rate are both 10% annually. 7. The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1. 8. The fair value of the equipment at the inception of the lease is $16,500,000. What is the net book value of the lease liability in Laguna Madre's balance sheet on June 30 of the current year?
$15,006,383 | ||
$14,784,778 | ||
$10,455,319 | ||
$11,970,536 |
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