On December 30, 20X5, Haber Co. leased a typical new machine from Gregg Corp. The following data relate to the lease transaction at the inception of the lease:
Lease term 10 years Annual payment at the end of each lease year $100,000 Useful life of machine 12 years Implicit interest rate 10% Present value of annuity due $1 for 10 periods at 10% 6.76 Present value ordinary annuity $1 for 10 periods at 10% 6.15 Fair value of the machine $700,000
The lease has no purchase option, and the possession of the machine reverts to Gregg when the lease terminates. At the inception of the lease, Haber should record a lease liability of: