On December 31, 2011, Cooke Company leased a machine under a capital lease for a period of ten years, contracting to pay $100,000 on signing the lease and $100,000 annually on December 31 of the next nine years. The present value at December 31, 2011, of the ten lease payments over the lease term discounted at 10 percent was $676,000. At December 31, 2012, Cooke's total capital lease liability is
A) $486,000.
B) $518,000.
C) $533,600.
D) $607,960.

Question

Quizplus · Accepted Answer

The correct answer is C because the total capital lease liability at December 31, 2012, is $533,600. This is calculated by taking the present value of the remaining nine lease payments at December 31, 2012, which is $533,600.

On December 31, 2011, Cooke Company Leased a Machine Under