Question
Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, with the first payment due at lease inception.
Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Wildhorse, Inc.s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Wildhorse, Inc.) is 7%, what is the amount recorded for the leased asset at the lease inception?
PV Annuity Due | PV Ordinary Annuity | |
7%, 4 periods | 3.62432 | 3.38721 |
9%, 4 periods | 3.53129 | 3.23972 |
$1406531
$1533117
$1573506
$1470564
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