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Leased asset/liability

MacKenzie Corporation is considering leasing a new asset. The lease would run for eight years and require eight beginning-of-year payments of $100,000 each. If MacKenzie capitalizes this lease for financial reporting purposes at a 10 percent rate, what asset amount will be reported initially on its balance sheet? What liability amount will be reported on its balance sheet? (Remember, lease payments are made at the beginning of each year, making them an annuity due.)

Would this mean on the balance sheet $800,000 would be the liability amount on the balance sheet originally?

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It would not mean $800,000 as the amount at the start of the year. The amount on the balance sheet would be the ...

Solution Summary

The solution explains the amount of leased asset and liability that would be reported in the balance sheet.