Determine the balance in the lease liability

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Seaboard Motors leased equipment from Aqua Corporation on December 31, 2015. The term of the lease is for 10 years with an expiration of December 31, 2024. The useful life of the asset is 10 years. The annual lease payments are $150,000 which are due on December 31 of each year. Seaboard Motors made the first payment on December 31, 2015. The incremental borrowing rate for Seaboard Motors is 12% as of December 31, 2015. Aqua Corporation’s implicit rate is 8% and is known by Seaboard Motors. Seaboard Motors determined the lease is a capital lease and treated it appropriately as a capital lease.

Requirement:

Determine the balance in the lease liability for Seaboard Motors as of December 31, 2018.

Round all calculations to the nearest dollar. You are also required to utilize the time value tables from the textbook. Do not compute the answers with a financial calculator as if your computations are not within +/- $2 of my solution then you will not receive any credit.

The topic is Accounting for Leases.

Reference no: EM131256229

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