Reference no: EM132487449
Question - On January 1, 2020, Marlene Corp. enters into an agreement with Dietrich Rentals Inc. to lease a machine from them. Both corporations adhere to ASPE. The following data relate to the agreement:
1. The term of the non-cancellable lease is three years with no renewal option. Payments of $271,622 are due on December 31 of each year.
2. The fair value of the machine on January 1, 2020, is $700,000. The machine has a remaining economic life of 10 years, with no residual value. The machine reverts to the lessor upon the termination of the lease.
3. Marlene depreciates all its machinery on a straight-line basis.
4. Marlene's incremental borrowing rate is 10%. Marlene does not have knowledge of the 8% implicit rate used by Dietrich.
If Dietrich records this lease as a finance lease, what amount would be recorded as Lease Receivable at the inception of the lease?
A. 814866
B. 271622
C. 700000
D. 675483
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