Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $495,678, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Chambers Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000   What is the initial lease liability?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $495,678, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Chambers Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000

 

What is the initial lease liability?

 

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