On January 1, 2015, Cape Cod Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Cape Cod to make annual payments of $150,000 at the beginning of each year for five years with the title passing to Cape Cod at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Cape Cod uses the straight-line method of depreciation for all of its fixed assets. Cape Cod appropriately accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $625,479 at an effective interest rate of 10%. In 2016, Cape Cod should record interest expense of? $32,547. $37,303. $47,548. $52,302.

On January 1, 2015, Cape Cod Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Cape Cod to make annual payments of $150,000 at the beginning of each year for five years with the title passing to Cape Cod at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Cape Cod uses the straight-line method of depreciation for all of its fixed assets. Cape Cod appropriately accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $625,479 at an effective interest rate of 10%. In 2016, Cape Cod should record interest expense of? $32,547. $37,303. $47,548. $52,302.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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