Exhibit 21-2 On January 1, 2010, Maury Company leased equipment, signing a five-year lease that requires annual lease payments of $20, 000.The lease qualifies as a capital lease.The payments are made at year-end, and the first payment will be made at December 31, 2010.In addition, Maury guarantees the residual value to be $10, 000 at the end of the lease term.Maury correctly uses the lessor's implicit interest rate, which is 12%.The present value factors for five periods at 12% are as follows:
$\begin{array}{llr}
\text {Present value of $ \$ 1 $ } &0.567427\
\text { Present value of ordinary annuity of $ \$ 1 $ } &3.604776\
\end{array}$

- Refer to Exhibit 21-2.The interest expense associated with the leased equipment for the year ending December 31, 2010, is

Question

Exhibit 21-2 On January 1, 2010, Maury Company leased equipment, signing a five-year lease that requires annual lease payments of $20, 000.The lease qualifies as a capital lease.The payments are made at year-end, and the first payment will be made at December 31, 2010.In addition, Maury guarantees the residual value to be $10, 000 at the end of the lease term.Maury correctly uses the lessor's implicit interest rate, which is 12%.The present value factors for five periods at 12% are as follows:
$\begin{array}{llr}
  \text {Present value of $ \$ 1 $  } &0.567427\
 \text { Present value of ordinary annuity of $ \$ 1 $ } &3.604776\
\end{array}$

- Refer to Exhibit 21-2.The interest expense associated with the leased equipment for the year ending December 31, 2010, is

Quizplus · Accepted Answer

The present value of the lease payments is calculated using the present value of an ordinary annuity factor: $20,000 * 3.604776 = $72,095.52. The present value of the guaranteed residual value is $10,000 * 0.567427 = $5,674.27. The total present value is $72,095.52 + $5,674.27 = $77,769.79. The interest expense for the first year is 12% of this present value: $77,769.79 * 0.12 = $9,332.37, rounded to $9,332.

Exhibit 21-2 on January 1, 2010, Maury Company Leased Equipment