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Question
1. Five payments of $26,379.74 (a 9% implicit rate) due at the end each year.2. The fair value of the tractor is $100,000.
3. The lease is nonrenewable and the tractor reverts to Star at the end of the lease term.
4. The tractor has a six-year economic life.
5. Hatfield has an excellent credit rating.
6. Star offers no warranty on the tractor other than the manufacturer's two-year warranty that is handled directly with the manufacturer.
On January 1, 2011 Lessee Company entered into a five-year lease which required annual payments of $60,000. The first payment was due at the inception of the lease. The present value of the minimum lease payments to record the lease was $250,192; the applicable discount rate was 10%. Lessee Company treated the lease as a capital lease. What is the balance of Lessee Company's lease liability as of December 31, 2011?
A. $209,211
B. $275,211
C. $190,192
D. $149,211
Answer
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