Nice Manufacturing Company Leased a Piece of Nonspecialized Equipment for Use

question 64

Multiple Choice

Nice Manufacturing Company leased a piece of nonspecialized equipment for use in its operations from Righteous Leasing on January 1, 2019. The 10-year lease requires lease payments of $9,500, beginning on January 1, 2019, and at each December 31 thereafter through 2027. The equipment is estimated to have a 10-year life, is depreciated on the straight-line basis and will have a $2,000 residual value at the end of the lease term on December 31, 2028, which is guaranteed by Nice. Nice's incremental borrowing rate is 7%. Initial direct costs of $2,500 are incurred on January 1, 2019. Righteous Leasing acquired the asset just prior to the lease term at a cost of $64,012. Collection of all lease payments is reasonably assured. What is the amount of the lease liability recorded by Nice at the lease's commencement?

• A) $67,741
• B) $72,412
• C) $74,912
• D) $22,500

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