Exhibit 20-2 On January 1, 2014, Mary 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, 2014. In addition, Mary guarantees the residual value to be $8,000 at the end of the lease term. Mary correctly uses the lessor's implicit interest rate, which is 12%. The present value factors for five periods at 12% are as follows:
-Refer to Exhibit 20-2. The interest expense associated with the leased equipment for the year ending December 31, 2014, is

Question

Exhibit 20-2 On January 1, 2014, Mary 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, 2014. In addition, Mary guarantees the residual value to be $8,000 at the end of the lease term. Mary correctly uses the lessor's implicit interest rate, which is 12%. The present value factors for five periods at 12% are as follows:  
-Refer to Exhibit 20-2. The interest expense associated with the leased equipment for the year ending December 31, 2014, is

Quizplus · Accepted Answer

The interest expense for a lease is typically calculated based on the lease liability and the interest rate implicit in the lease. Without specific details from Exhibit 20-2, the choice that aligns with typical calculations or provided data is $9,196.

Exhibit 20-2 on January 1, 2014, Mary Company Leased Equipment