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What amount of interest expense should Carla Vista report

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Question - On January 2, 2018, Carla Vista, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $250000 starting at the beginning of the first year, with title passing to Carla Vista at the expiration of the lease. Carla Vista treated this transaction as a capital lease. Useful life of 15 years, with no salvage value. uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1536142, based on implicit interest of 10%.

In its 2018 income statement, what amount of interest expense should Carla Vista report from this lease transaction?

a. $127409

b. $153614

c. $128614

d. $0

Reference no: EM132486930

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