Question

Titanic Corporation leased executive limousines under terms of $110,000 to be paid at the inception of the lease, and four equal annual payments of $120,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be

Answer 1

Answer:

First year Interest rate expenses  =  11% * $590,000 =  $64,900

Explanation:

Total leased payment = deposit + total instalment

                                      =   $110,000 +  4(120,000)

                                      =  $110,000 + $480,000

                                       =   $590,000