Question

Titanic Corporation leased executive limousines under terms of $20,000 to be paid at the inception of the lease, and four equal annual payments of $30,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is t1%. The first year's interest expense limousines under terms of $20,000 to be paid at the inception of the lease, and four equal annual payments of References would be: Multiple Choice a.$13,200b.$13,238

Answer 1

Answer:

10,238.08

Explanation:

Data provided as per the question

Annual payment = $30,000

Implicit lease = 11%

The computation of per equal payment is shown below:-

Four equal annual payment and $1 = 3.10245

Present value = $30,000 × 3.10245

= 93,073.5

First year interest expense = 93,073.5 × 11%

= 10,238.08

Therefore the first year interest expense = 10,238.08 and hence option is not available. Also there is misprint of 11% so I corrected.