Question
On January 1, 2018, Sunland Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Sunland to make annual payments
On January 1, 2018, Sunland Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Sunland to make annual payments of $206000 at the beginning of each year for 5 years beginning on January 1, 2018 with the title passing to Sunland at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sunland uses the straight-line method of depreciation for all of its fixed assets. Sunland accordingly accounts for this lease transaction as a capital lease. The minimum lease payments were determined to have a present value of $873382 at an effective interest rate of 9%. In 2019, what should Sunland record as interest expense?
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