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On January 1, 2020, Hammons Company signed a five-year noncancelable lease for equipment. Hammons was required to make annual payments of $150,000 at the beginning
On January 1, 2020, Hammons Company signed a five-year noncancelable lease for equipment. Hammons was required to make annual payments of $150,000 at the beginning of each year with the title passing to Hammons at the end of the lease. Hammons appropriately accounts for this lease transaction as a finance lease. Hammons uses the straight-line method of amortization for all of its leased assets, and the leased equipment has an estimated useful life of 7 years with no salvage value. If the lease payments were determined to have a present value of $625,479 at an effective interest rate of 10%, what should Hammons record as interest expense in 2021? $37,303 $32,547 $52,302 O $47,548
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