On January 2, 2021, Cullumber, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $420000 starting at the beginning of the first year, with title passing to Cullumber at the expiration of the lease. Cullumber treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Cullumber uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $2695416, based on implicit interest of 9%. In its 2021 income statement, what amount of interest expense should Cullumber report from this lease transaction? O $204787 O $221694 O $269542 O $0

On January 2, 2021, Cullumber, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $420000 starting at the beginning of the first year, with title passing to Cullumber at the expiration of the lease. Cullumber treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Cullumber uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $2695416, based on implicit interest of 9%. In its 2021 income statement, what amount of interest expense should Cullumber report from this lease transaction? O $204787 O $221694 O $269542 O $0

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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