On January 2, 2021, Hey Company leased a heavy equipment to be used in its construction business from Hot Company. The terms of the lease contract follows: Lease term-------10 years Useful life of the equipment -------12 years Annual rental payable at the beginning of lease, January 2, 2021 -----500,000 Implicit interest rate------------------------------------------------------14% PV of annuity of 1 in advance for 10 periods at 14%--------------------5.95 PV of 1 for 10 periods at 14%--------------------------------------------0.27 What amount of interest expense will be reported by Hey for the year 2022?
On January 2, 2021, Hey Company leased a heavy equipment to be used in its construction business from Hot Company. The terms of the lease contract follows: Lease term-------10 years Useful life of the equipment -------12 years Annual rental payable at the beginning of lease, January 2, 2021 -----500,000 Implicit interest rate------------------------------------------------------14% PV of annuity of 1 in advance for 10 periods at 14%--------------------5.95 PV of 1 for 10 periods at 14%--------------------------------------------0.27 What amount of interest expense will be reported by Hey for the year 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 2021, Hey Company leased a heavy equipment to be used in its construction business from Hot Company. The terms of the lease contract follows:
Lease term-------10 years Useful life of the equipment -------12 years
Annual rental payable at the beginning of lease, January 2, 2021 -----500,000
Implicit interest rate------------------------------------------------------14%
PV of annuity of 1 in advance for 10 periods at 14%--------------------5.95
PV of 1 for 10 periods at 14%--------------------------------------------0.27
What amount of interest expense will be reported by Hey for the year 2022?
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