What is the amount of interest expense recorded by pisa

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Problem 1: Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pisa, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Pisa, Inc. in the first year of the asset's life?

                             PV Annuity Due             PV Ordinary Annuity
8%, 4 periods        3.57710                         3.31213
10%, 4 periods        3.48685                         3.16986

Reference no: EM132932170

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