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What is the amount of the lease liability

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Question - On December 31, 2016, Northern Skies Corp. leased a machine from Eastern Star Ltd. for a five-year period. Annual lease payments are $315,000 (including $15,000 annual executory costs), due on December 31 each year. The first payment was made on December 31, 2016, and the second payment on December 31, 2017. The appropriate interest rate for this type of lease is 10%. The present value of the minimum lease payments at the inception of the lease (before the first payment) was $1,251,000. The lease is being accounted for as a finance lease by Northern Skies.

What is the amount of the lease liability Northern Skies should report on its December 31, 2017 statement of financial position?

a) $951,000.

b) $936,000.

c) $855,900.

d) $746,100.

Reference no: EM132566765

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