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On January 1, 2022, Easton Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Easton to make annual
On January 1, 2022, Easton Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Easton to make annual payments of $330,000 at the end of each year for ten years with the title passing to Easton at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Easton uses the straight-line method of depreciation for all of its fixed assets. Easton accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $2,013,024 at an effective interest rate of 8%. With respect to this capitalized lease, Easton should record for 2022 a. lease expense of $330,000. b. interest expense of $134,202 and depreciation expense of $114,204. c. interest expense of $161,042 and depreciation expense of $134,202. d. interest expense of $137,045 and depreciation expense of $201,303
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