21 May WHAT IS THE LEASE LIABILITY THAT STOCKTON SHOULD REPORT ON THE BALANCE SHEET AT DECEMBER 31, 2008?
Stockton, Inc. leased machinery with a fair value of $250,000 from Lanai Machine Company on December 31, 2008. The contract is a six-year non cancelable lease with an implicit interest rate of 10 percent. The lease requires annual payments of $50,000 beginning December 31, 2008. Stockton appropriately accounted for the lease as a capital lease. Stockton’s incremental borrowing rate is 12 percent. Assuming the present value of an annuity due of 1 for 6 years at 10 percent is 4.7908 and the present value of an annuity due of 1 for 6 years at 12 percent is 4.6048, What is the lease liability that Stockton should report on the balance sheet at December 31, 2008?
a. $189,540
b. $200,000
c. $230,240
d. $239,540
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