On January 1, 2021, Wildhorse Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Wildhorse to make annual payments of $265000 at the end of each year for 10 years with the title passing to Wildhorse at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Wildhorse uses the straight-line method of depreciation for all of its fixed assets. Wildhorse accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $1861249 at an effective interest rate of 7%. With respect to this lease, Wildhorse should record for 2021 lease expense of $130287. interest expense of $130287 and amortization expense of $124083. interest expense of $124083 and amortization expense of $110750. interest expense of $116287 and amortization expense of $186125.
On January 1, 2021, Wildhorse Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Wildhorse to make annual payments of $265000 at the end of each year for 10 years with the title passing to Wildhorse at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Wildhorse uses the straight-line method of depreciation for all of its fixed assets. Wildhorse accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $1861249 at an effective interest rate of 7%. With respect to this lease, Wildhorse should record for 2021 lease expense of $130287. interest expense of $130287 and amortization expense of $124083. interest expense of $124083 and amortization expense of $110750. interest expense of $116287 and amortization expense of $186125.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 71BPSB: Depreciation Schedules Dunn Corporation acquired a new depreciable asset for $135,000. The asset has...
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On January 1, 2021, Wildhorse Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Wildhorse to make annual payments of $265000 at the end of each year for 10 years with the title passing to Wildhorse at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Wildhorse uses the straight-line method of
lease expense of $130287.
interest expense of $130287 and amortization expense of $124083.
interest expense of $124083 and amortization expense of $110750.
interest expense of $116287 and amortization expense of $186125.
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