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What value should the lease be recorded at initially

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Question - Bunker Company negotiated a lease with Gilbreth Company that begins on January 1, 2017. The lease term is 3 years, and the asset's economic life is 4 years. The annual lease payments are $8,000, payable at the end of the year. The cost and fair value of the asset are $25,000. Bunker's cost of borrowing is 7%. At the end of the lease, Bunker may purchase the asset for $3,000, and it's estimated to be worth $5,000 at that time. What value should the lease be recorded at initially?

Reference no: EM132531638

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