Leased asset at the lease inception

Reference no: EM13151394

Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Pisa, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception?

PV Annuity Due PV Ordinary Annuity

8%, 4 periods 3.57710 3.31213
10%, 4 periods 3.48685 3.16986

A) $307,767

B) $272,728

C) $284,969

D) $300,000

Reference no: EM13151394

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