Question
On January 1,2018, crane Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for crane to make annual payments of
On January 1,2018, crane Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for crane to make annual payments of $211000 at the beginning on January 1,2018 with the title passing to Crane at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Crane uses the straight-line method of depreciation for all of its fixed assets. Crane accordingly accounts for this lease transaction as a capital lease. The minimum lease payments were determined to have a present value of $879842 at an effective interest rate of 10%..
In 2018, crane should record interest expense of
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