Crane Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Crane. The six-year lease requires payment of $181000 at the beginning of each year, including $26100 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. Crane should record the leased asset at $903681. $773371. $867133. $742093.
Crane Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Crane. The six-year lease requires payment of $181000 at the beginning of each year, including $26100 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. Crane should record the leased asset at $903681. $773371. $867133. $742093.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Crane Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Crane. The six-year lease requires payment of $181000 at the beginning of each year,
including $26100 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. Crane should record the leased asset at
$903681.
$773371.
$867133.
$742093.
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