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Sheridan Company leases a machine from Cheyenne Corp. under an agreement that meets the criteria...

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Accounting

Sheridan Company leases a machine from Cheyenne Corp. under an agreement that meets the criteria to be a finance lease for Sheridan. The six-year lease requires payment of $175000 at the beginning of each year, which includes $25500 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Sheridan should record the leased asset at
$716223.
$873724.
$838388.
$74641
image

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