Identify the correct options for interest expense and depreciation expense that Incorporation L should record.

Question

On January 2, 2021, Blossom, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $280000 starting at the beginning of the first year, with title passing to Blossom at the expiration of the lease. Blossom treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Blossom uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1720479, based on implicit interest of 10%.In its 2021 income statement, what amount of amortization expense should Blossom report from this lease transaction? $280000 $114699 $142699 $172048

Answer 1

Question

Chapter 20, Problem 7MC

To determine

Identify the correct options for interest expense and depreciation expense that Incorporation L should record.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

On January 2, 2021, Blossom, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $280000 starting at the beginning of the first year, with title passing to Blossom at the expiration of the lease. Blossom treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Blossom uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1720479, based on implicit interest of 10%.In its 2021 income statement, what amount of amortization expense should Blossom report from this lease transaction? $280000 $114699 $142699 $172048

On January 1, 2021, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dean to make annual payments of $220,000 at the end of each year for ten years with the title passing to Dean at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Dean uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $1,342,016 at an effective interest rate of 8%. With respect to this lease, Dean should record for 2021 Question 301 options: interest expense of $91,363 and depreciation expense of $134,202. interest expense of $89,468 and depreciation expense of $76,136. interest expense of $107,361 and depreciation expense of $89,468. lease expense of $220,000.

On January 2, 2021, Ivanhoe, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $200000 starting at the beginning of the first year, with title passing to Ivanhoe at the expiration of the lease. Ivanhoe treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Ivanhoe uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1283532, based on implicit interest of 9%.In its 2021 income statement, what amount of amortization expense should Ivanhoe report from this lease transaction? $85569 $105569 $128353 $200000