On January 1, 2016, Watson Company Signed a Four-Year Lease

question 45

Multiple Choice

On January 1, 2016, Watson Company signed a four-year lease requiring annual payments of $45,000, with the first payment due on January 1, 2016. Watson's incremental borrowing rate was 7%. Actuarial information for 7% follows:
Assuming the lease qualifies as a capital lease, what amount should be recorded as leased equipment under capital leases on January 1, 2016 rounded to the nearest dollar) ?

• A) $197,424
• B) $163,094
• C) $152,424
• D) $184,509

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Definitions:

Sago Palms

Tropical plants of the genus Cycas, known for their large compound leaves and the production of sago, a starch extracted from their trunks.

Tree Ferns

Ancient group of plants with large leaves and a trunk resembling a tree, thriving mostly in tropical and subtropical regions.

Cycads

Slow-growing, palm-like plants from the order Cycadales, known for their large compound leaves and production of cones.

Seedless Vascular Plants

Plants that have vascular tissue for transporting water and nutrients but reproduce through spores rather than seeds.