Cullumber, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $354152, 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. Cullumber, Inc.s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Cullumber, Inc.) is 8%. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Cullumber, Inc. in the first year of the assets life?

PV Annuity Due PV Ordinary Annuity

8%, 4 periods 3.57710 3.31213

9%, 4 periods 3.53129 3.23972

$93840

$31874

$73015

$0