On January 1, 2021, Small company leased a machine from Huge Company. The following information relates to the lease: Annual rental payable in advance every January 1 - P500,000 Unguaranteed residual value - P50,000 Implicit interest rate in lease - 12% Incremental borrowing rate - 15% Lease term - 6 years Estimated useful life of the machine - 8 years (Round off the PV factor to four decimal places, then do not round off during the computation) What is the balance of Lease Liability at December 31, 2022?

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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.