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At what amount should gephardt record the equipment

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Question - On December 31, 2016, Gephardt Enterprises leased equipment from B & B Equipment Rental. The following is pertinent lease transaction data:

(a) The estimated seven-year useful equipment life coincides with the lease term.

(b) The first of the seven equal annual $200,000 lease payments was paid on December 31, 2016.

(c) B & B's implicit interest rate of 12 percent is known to Gephardt.

(d) Gephardt's incremental borrowing rate is 14 percent.

(e) Present values of an annuity of 1 in advance for seven periods are 5.11 at 12 percent and 4.89 at 14 percent.

At what amount should Gephardt record the equipment on the books?

A. $1,022,000

B. $1,400,000

C. $0

D. $978,000

Reference no: EM133124454

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