1.Skor Co. leased equipment to Douglas Corp. on January 2, 2011 for a 7-year period expiring December 31, 2017. Equal payments under the lease are $600,000 and are due on January 2 of each year. The first payment was made on January 2, 2011. The cost of the equipment is $2,400,000. The lease is appropriately accounted for as a sales-type lease. The present value of the lease payments is $2,800,000. What is the effect on Cost of Goods Sold for the year ended December 31, 2011?

Select one:

a. $514,286

2.

On January 1, 2018, Penn Corp. signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Penn to make annual payments of $100,000 at the end of each year for ten years. Penn properly accounted for this lease as a capital lease. The lease payments had a present value of $614,457 at an effective interest rate of 10%. Interest expense to be recorded in 2018 will be:

Select one:

a. $61,446

b. $10,000

c. $56,507

d. $48,684

e. $51,446

b. $600,000

c. $342,857

d. $2,400,000

e. $2,800,000