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On January 1, 2018, Shady Company signed an eight-year noncancelable lease for well drilling machine. The terms of the lease called for Shady to make
On January 1, 2018, Shady Company signed an eight-year noncancelable lease for well drilling machine. The terms of the lease called for Shady to make annual payments of $59.970 at the end of each year for eight years with the title passing to Shady at the end of this period. The machine has an estimated useful life of 12 years and no salvage value. Shady uses straight-line method of depreciation on all of its fixed assets. Shady accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $387,600 at an effective interest rate of 5%. With respect to this capitalized lease, what expense should Shady record for year 2018? There may be more than one expense. Record all you deem appropriate. Record account names and amounts). [5 points
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