East Company leased a new machine from North Company on May 1, 2014, under a lease with the following information:
Lease term 10 years
annual rental payable at beginning of each year $40,000
Useful life of machine 12 years
Implicit interest rate 15%
East has the option to purchase the machine on May 1, 2024, by paying $50,000, which approximates the expected fair value of the machine on the option exercise date.
Required:
1. What is the amount of the capitalized leased asset on May 1, 2014?