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Compute the amount of the lease liability

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Question: Sheridan Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $24,300 at the beginning of each year. The first payment is received on January 1, 2020. Sheridan had purchased the machine during 2019 for $150,000. The first payment is received on January 1, 2020. Sheridan had purchased the machine during 2019 for $150,000. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. . Assume that Dexter Corporation does not know the rate implicit in the lease used by Sheridan, and Dexter's incremental borrowing rate is 8%. In addition, assume that Dexter incurs initial direct costs of $11,000.

Compute the amount of the lease liability and right-of-use asset for Dexter.

Reference no: EM132716797

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