Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pisa, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this recorded by Pisa, Inc. in the first year of the asset's life?
PV Annuity Due PV Ordinary Annuity
- 8% 4 periods 3.57710 3.31213
- 10% 4 periods 3.48685 3.16986