Sunland, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of...

 

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Sunland, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $264152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Sunland, Inc's incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Sunland, Inc.) is 7%. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Sunland, Inc. in the first year of the asset's life? PV Annuity Due PV Ordinary Annuity 7%, 4 periods 3.62432 3.38721 10%, 4 periods 3.48685 3.16987 Sunland, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $264152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Sunland, Inc's incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Sunland, Inc.) is 7%. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Sunland, Inc. in the first year of the asset's life? PV Annuity Due PV Ordinary Annuity 7%, 4 periods 3.62432 3.38721 10%, 4 periods 3.48685 3.16987

Answer rating: 100% (QA)

The amount of interest expense recorded by Sunland Inc in the first year of the assets life i... View the full answer