Carla Vista, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $294152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Carla Vista, Inc.s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Carla Vista, Inc.) is 8%. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Carla Vista, Inc. in the first year of the assets life?

PV Annuity Due PV Ordinary Annuity

8%, 4 periods 3.57710 3.31213

11%, 4 periods 3.44371 3.10245

$60645

$32357

$77942

$0