Metcalf company leases a machine from vollmer corp. under an agreement which meets the criteria to be a capital lease for metcalf.
the six-year lease requires payment of $170,000 at the beginning of each year, including $25,000 per year for maintenance, insurance, and taxes.
the incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee.
the present value of an annuity due of 1 for six years at 10% is 4.79079. the present value of an annuity due of 1 for six years at 8% is 4.99271.
metcalf should record the leased asset at :
a. $848,761.
b. $814,435.
c. $723,943.
d. $694,665.
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