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On January 1, 2017, Sheffield Company contracts to lease equipment for 5 years, agreeing to make a payment of $109,913 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $466,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Sheffield’s incremental borrowing rate is 6%, and the implicit rate in the lease is 9%, which is known by Sheffield. Title to the equipment transfers to Sheffield at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.

SHEFFIELD COMPANY Balance Sheet (Partial) December 31, 2017 Assets Noncurrent Assets Right-of-Use Asset 279600 Liabilities Current Liabilities Lease Liability 77865 Noncurrent Liabilities Lease Liability 278222

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