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    Net lease liability

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    Star Company leases a computer on January 1, 2006. This lease had the following terms: Lease payments: $2,500,000 at the end of each year , with the first payment being made at 12/31/06. Lease term: 10 years Implicit interest rate and incremental borrowing rate: 4% annually. Fair value of the computers at 1/1/06 is $20,277,239.45 . There is no residual value. What is the (net) lease liability on Star's 12/31/06 balance sheet? Round your answer to the nearest dollar.

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    Solution Preview

    The beginning liability is 20,277,239.45 which is the present value of all the lease payments discounted at 4%
    At the end of year ...

    Solution Summary

    The solution explains how to calculate the net lease liability.