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can you explain why depriciation cost is $23797 and interest expense is 12717? Wildhorse Steel Corporation, as lessee, signed a lease agreement for equipment for
can you explain why depriciation cost is $23797 and interest expense is 12717?
Wildhorse Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2023. Annual rental payments of $43,000 are to be made at the beginning of each lease year (January 31 ). The insurance and repairs and maintenance costs are the lessee's obligation. The interest rate used by the lessor in setting the payment schedule is 9%; Wildhorse's incremental borrowing rate is 10%. Wildhorse is unaware of the rate being used by the lessor. At the end of the lease Wildhorse has the option to buy the equipment for $3,900, which is considerably below its estimated fair value at that time. The equipment has an estimated useful life of seven years with no residual value. Wildhorse uses straight-line depreciation on similar equipment that it owns, and follows IFRS. Click hicte to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. late Account Titles and Explanation 31,2023 Depreciation Expense Accumulated Depreciation - Right-of-Use Asset (To record depheciation expense.) Interest Expens: Lease Liability (To record interest.) Lease Liabitity Interest Expense Cash Debit Credit 23,797 41,844 1,156 (To record lease payment) Step by Step Solution
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