On December 31, 2021, Crane, Inc. leased machinery with a fair value of $2125000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease requiring annual payments of $410000 beginning December 31, 2021. The lease is appropriately accounted for by Crane as a finance lease. Craneâs incremental borrowing rate is 11%. Crane knows the interest rate implicit in the lease payments is 10%.
The present value of an annuity due of 1 for 6 years at 10% is 4.7908.
The present value of an annuity due of 1 for 6 years at 11% is 4.69590.
In its December 31, 2021 balance sheet, Crane should report a lease liability of
(A) $1964228.
(B) $1554228.
(C) $1715000.
(D) $1925319.
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