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Neal Corp. entered into a 9-year capital lease on a warehouse on December 31, Year 4. The land and building are capitalized as a single unit.
Neal Corp. entered into a 9-year capital lease on a warehouse on December 31, Year 4. The land and building are capitalized as a single unit. Lease payments of $52,000, which include real estate taxes of $2,000, are due annually, beginning on December 31, Year 5, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal’s incremental borrowing rate is 9%. The rounded present value of an ordinary annuity for 9 years at 9% is 5.6. What amount should Neal Report as capitalized lease liability at December 31, Year 4?
