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On January 1, 2021, Carla Vista Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Carla Vista to make
On January 1, 2021, Carla Vista Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Carla Vista to make annual payments of $180000 at the beginning of each year for 5 years with title passing to Carla Vista at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Carla Vista uses the straight-line method of depreciation for all of its fixed assets. Carla Vista accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $738440 at an effective interest rate of 11%. With respect to this lease, for 2022 Carla Vista should record interest expense of $68185. interest expense of $61428. interest expense of $81228. interest expense of $48385
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