On January 1, a company entered into a capital lease resulting in an obligation of $20,000 being recorded on the balance sheet. Estimated economic life of the leased asset is ten years with an expected salvage value of zero at the end of ten years. The company will depreciate this asset on a straight-line basis over its economic life. The lessor's implicit interest was 10 percent. At the end of the first year of the lease, the cash flow from financing activities section of the lessee's statement of cash flows showed a use of cash of $2,200 applicable to the lease. How much did the company pay the lessor in the first year of the lease?

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The company paid the lessor $4,200 in the first year of the lease. This includes the interest component ($20,000 * 10% = $2,000) and the principal repayment, which is the difference between the total payment and the interest ($4,200 - $2,000 = $2,200). The cash flow from financing activities shows a use of cash of $2,200, which represents the principal portion of the lease payment. The total payment also includes the interest expense, making the total payment $4,200.

On January 1, a Company Entered into a Capital Lease