On January 1, 2016, Mark Company leased equipment by signing a five-year lease that required five payments of $85,000 due on December 31 of each year. The equipment remains the property of the lessor at the end of the lease, and Mark does not guarantee any residual value. Using a rate of 11%, Mark capitalized the lease on January 1, 2016, in the amount of $314,152. What is the amount of the lease obligation on December 31, 2017?

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To find the lease obligation on December 31, 2017, we first calculate the present value of the lease payments on January 1, 2016, which is given as $314,152. This amount represents the capitalized lease obligation. Over the next two years, Mark makes payments on December 31 of each year, reducing this obligation. Each payment also includes interest on the outstanding obligation.For 2016:- Interest for the year = 11% of $314,152 = $34,556.72- Payment made = $85,000- Reduction in principal = $85,000 - $34,556.72 = $50,443.28- New lease obligation = $314,152 - $50,443.28 = $263,708.72For 2017:- Interest for the year = 11% of $263,708.72 = $29,007.96- Payment made = $85,000- Reduction in principal = $85,000 - $29,007.96 = $55,992.04- New lease obligation = $263,708.72 - $55,992.04 = $207,716.68Rounding to the nearest dollar, the lease obligation on December 31, 2017, is approximately $207,717.

On January 1, 2016, Mark Company Leased Equipment by Signing