Larkins, Inc. leases equipment from Bostic for $30,000 per year for three years....
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Larkins, Inc. leases equipment from Bostic for $30,000 per year for three years. The contract is signed on Dec 31, 20X0 and the first payment is made immediately. The second payment will be made on Dec 31, 20X1. This lease contract does not meet any of the five criteria for a finance lease.
Larkins has an incremental borrowing rate of 10 percent. The present value factor for a $1 ordinary annuity at 10% for 2 years is 1.736 and for 3 years the factor is 2.487. What liability should Larkins report on its December 31, 20X1 balance sheet? F
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