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On October 1, 2021, Sonoma Company leased equipment from Napa Inc. in lease payable in five...

On October 1, 2021, Sonoma Company leased equipment from Napa Inc. in lease payable in five equal annual payments of $560,000, beginning Oct 1, 2022. Similar transactions have carried an 9% interest rate. The right-of-use asset would be recorded at: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Choices are

2800000

0

2178204

2374243

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Answer #1
Annual Lease payment (A) $5,60,000
PVAD $1, rate 9% and period 5 (A) 3.88965
Present value of lease payment (A) x (B) $21,78,204
The right-of-use asset would be recorded at $2178204
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