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What amount should action report as lease liability

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Question - On December 29, 20X4, Action Corp. signed a 7-year finance lease for an airplane to transport its sports team around the country. The airplane's fair value was $841,500. Action made the first annual lease payment of $153,000 on December 31, 20X4. Action's incremental borrowing rate was 12%, and the interest rate implicit in the lease, which was known by Action, was 9%.

The following are the rounded present value factors for an annuity due:

9% for 7 years 5.5

12% for 7 years 5.1

Required - What amount should Action report as lease liability in its December 31, 20X4 balance sheet?

a. $780,300

b. $688,500

c. $627,300

d. $841,500

Reference no: EM132737527

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