On January 1, 2014, Sauder Corporation signed a five-year, non-cancellable lease for equipment. The terms of the
Question:
On January 1, 2014, Sauder Corporation signed a five-year, non-cancellable lease for equipment. The terms of the lease required Sauder to make annual payments of $150,000 at the beginning of each year for five years and title would pass to Sauder at the end of this period. The equipment has an estimated useful life of 7 years and has no salvage value. Sauder uses the straight-line depreciation method for all of its fixed assets. Sauder properly accounts for this lease transaction as a capital lease. The minimum lease payments were determined to have a present value of $625,479 at an effective interest rate of 10%.
In 2015, what amount of interest expense Sauder should record ?
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield