Question
Elliott Company leased a delivery truck with a fair value of $85,000 and an estimated useful life of 8 years from Larson Motors signing a
Elliott Company leased a delivery truck with a fair value of $85,000 and an estimated useful life of 8 years from Larson Motors signing a five-year lease on December 30, 2017. The lease begins on January 1, 2018, and Elliott will return the truck to Larson at the conclusion of the lease on Dec 31, 2022. Elliott made an initial lease payment of $12,000 on January 1 of 2018, with the remaining lease payments of the same amount due on January 1 of the remaining four years. The implicit rate of interest on the lease is 4% and is known by Elliott. The lease doesnt contain a purchase option, incentives, residual value guarantees, or a transfer of ownership and Elliott didnt incur any initial direct costs related to the lease. Assuming this lease is correctly classified as an operating lease:
What amount of interest expense how much interest expense would be recognized in 2019?
Group of answer choices
$ 0
$ 1,332
$ 1,742
D. $ 2,222
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started