U7Q4(330)

On December 31, 2019, Sandhill Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Sandhill agreed to make annual lease payments of $20,500, beginning on December 31, 2019. The expected residual value of the machinery at the end of the lease term is $10,250, though Sandhill does not guarantee any residual value to Terminator. What amount will Sandhill record as its lease liability on December 31, 2019, if its incremental borrowing rate is 6% and the implicit rate of the lease is unknown? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.) Click here to view factor tables.

Lease liability

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