Modesto, Inc leased machinery with a fair value of $250,000 from Layton Machine Co on December 31 . 2014 . The contract is a six-year noncancelable lease with an implicit interest rate of 1 . percent. The lease requires annual payments of $50,000 beginning December 31 . 2014 . Modesto appropriately accounted for the lease as a capital lease. Modesto's incremental borrowing rate is 1 . percent
Assuming the present value of an annuity due of 1 for 6 years at 1 . percent is 4.7908 and the present value of an annuity due of 1 for 6 years at 1 . percent is 4.6048, what is the lease liability that Modesto should report on the balance sheet at December 31 . 2014?
a. $189,540
b. $200,000
c. $230,240
d. $239,540
A
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