Neal Corp. entered into a nine-year capital lease on a warehouse on December 31, 2016. Lease payments of $52,000, which includes real estate taxes of $2,000, are due annually, beginning on December 31, 2017, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal’s incremental borrowing rate is 9%. The rounded present value of an ordinary annuity for nine years at 9% is 6.0. What amount should Neal report as capitalized lease liability at December 31, 2016? a. $300,000 b. $312,000 c. $450,000 d. $468,000

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A: Calculate inital lease liability:

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A:

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A:

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A:

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A:

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.