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How much is interest expense on the lease for the first year

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Reference no: EM132691980

The following information relates to B&B, Inc.'s equipment lease with an inception date of January 1:

Fair value of equipment at lease inception, $114,000

Lease term, 4 years

Economic life of property, 5 years

Implicit interest rate, 7%

Annual lease payment due on December 31, $32,000

Present value of the minimum lease payments, $100,883

The equipment reverts back to the lessor at the end of the lease term.

Problem 1 How much is interest expense on the lease for the first year?

A. $5,116

B. $7,062

C. $6,653

D. $4,920

Reference no: EM132691980

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