On january 1 2018 sauder corporation signed a five

On January 1, 2018, Sauder Corporation signed a five-year noncancelable lease for equipment.
The terms of the lease called for Sauder to make annual payments of $200,000 at the beginning
of each year for five years beginning on January 1, 2018 with the title passing to Sauder at the
end of this period. The equipment has an estimated useful life of 7 years and no salvage value.
Sauder uses the straight-line method of depreciation for all of its fixed assets. Sauder accordingly
accounts for this lease transaction as a capital lease. The minimum lease payments were
determined to have a present value of $833,972 at an effective interest rate of 10%.
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Test Bank for Intermediate Accounting, Sixteenth Edition
62. In 2018, Sauder should record interest expense of
On January 1, 2018, Sauder Corporation signed a five-year noncancelable lease for equipment.
The terms of the lease called for Sauder to make annual payments of $200,000 at the beginning
of each year for five years beginning on January 1, 2018 with the title passing to Sauder at the
end of this period. The equipment has an estimated useful life of 7 years and no salvage value.
Sauder uses the straight-line method of depreciation for all of its fixed assets. Sauder accordingly
accounts for this lease transaction as a capital lease. The minimum lease payments were
determined to have a present value of $833,972 at an effective interest rate of 10%.
63. In 2019, Sauder should record interest expense of
64. On December 31, 2018, Kuhn Corporation leased a plane from Bell Company for an
seven-year period expiring December 31, 2025. Equal annual payments of $450,000 are
due on December 31 of each year, beginning with December 31, 2018. The lease is
properly classified as a capital lease on Kuhn’s books. The present value at December 31,
2018 of the eight lease payments over the lease term discounted at 10% is $2,640,792.
Assuming the first payment is made on time, the amount that should be reported by Kuhn
Corporation as the lease liability on its December 31, 2018 balance sheet is