Facts for Question 7 On January 1, 2025, Metalcraft leases a…
Facts for Question 7 On January 1, 2025, Metalcraft leases a machine from Capital Leasing for 10 years with an annual lease payment of $15,000. The first payment is due on January 1, 2025. The rate implicit in the lease (which is known to Metalcraft) is 10%. The lease contract allows Metalcraft to terminate the lease after three years by paying an early termination penalty of $45,000. At the start of the lease, it is reasonably certain that Metalcraft will terminate the lease at the end of three years. The residual value of the machine at the end of the 10 year lease is estimated to be $5,000 and none is guaranteed by Metalcraft. Present value factors follow PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 3 periods 2.73554 2.48685 0.751315 10%, 10 periods 6.75902 6.14457 0.385543 What amount will Metalcraft recognize as a right-of-use asset at lease inception?