Kingston Engineering Services (KES) acquired a backhoe machine under a capital lease agreement. KES pays the lessor $2700.00 at the beginning of every three months for 7 years. If KES can obtain seven-year financing at 6% compounded quarterly, what long term liability will initially be recorded?

Capital Lease

A long-term lease agreement that allows a lessee to use an asset while essentially treating it as if it were their own by recognizing it on their balance sheet.

Compounded Quarterly

The method of figuring out interest that includes both the original principal amount and the interest that has compounded from earlier periods, calculated every three months.

Long Term Liability

A financial obligation of a company that is due for a period exceeding one year, including bonds payable, long-term loans, lease obligations, and pension obligations.