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Zilch Inc. manufactures and leases computer systems. Zilch leases several computers to Five Star Company on January 1, 2021. The manufacturing cost of the computers
Zilch Inc. manufactures and leases computer systems. Zilch leases several computers to Five Star Company on January 1, 2021. The manufacturing cost of the computers was $6 million. This non-cancelable lease had the following terms (numbers made up):
- Lease payments: $1,300,000 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025.
- Lease term: five years (10 semiannual payments).
- No residual value; no purchase option.
- Economic life of equipment: five years.
- Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually.
- Fair value of the computers at January 1, 2021: $10 million.
What is the outstanding balance of the lease liability in Lone Star's June 30, 2021, balance sheet? (Round your answer to the nearest whole dollar.)
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