Wildhorse Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a capital lease for Wildhorse. The 6-year lease requires payment of $167000 at the beginning of each year, including $24700 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 11%; the lessor's implicit rate is 9% and is known by the lessee. The present value of an annuity due of 1 for six years at 11% is 4.69590. The present value of an annuity due of 1 for six years at 9% is 4.88965. Wildhorse should record the leased asset at
$816572.
$695797.
$668227.
$784215.
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