On January 1, a company entered into a capital lease resulting in an obligation of $20,000 being recorded on the balance sheet. 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?

Question

Quizplus · Accepted Answer

The company paid $4,200 in the first year: $2,000 as interest (10% of $20,000) and $2,200 as principal repayment, totaling $4,200.

On January 1, a Company Entered into a Capital Lease