Free Company (lessee) leases a machine from Denner Corp. (lessor) under an agreement which meets...
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Free Company (lessee) leases a machine from Denner Corp. (lessor) under an agreement which meets the criteria to be a financing lease for Free. The six-year lease requires payments of $126,000 at the beginning of each year. The $126,000 includes $20,000 per year paid to a third party for maintenance, insurance, and taxes The incremental borrowing rate for the lessee is 8%; the lessor's implicit rate is 10% and is not known by the lessee. The present value of an annuity due of 1 for six years at 8% is 4.99271 . The present value of an annuity due of 1 for six years at 10% is 4.79079 . Free should record the Right to Use Asset at
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