27. On January 1, 2021, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments of $180,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $750,578 at an effective interest rate of 10% With respect to this lease, for 2022 Ogleby should record a interest expense of $57,058. b. interest expense of $75,058. c. interest expense of $44,764. d. interest expense of $62,764.

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Chapter1: Financial Statements And Business Decisions
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27.
On January 1, 2021, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments
of $180,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years
and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease transaction as a
finance lease. The lease payments were determined to have a present value of $750,578 at an effective interest rate of 10%.
With respect to this lease, for 2022 Ogleby should record
a. interest expense of $57,058.
b. interest expense of $75,058.
c. interest expense of $44,764.
d. interest expense of $62,764.
Transcribed Image Text:27. On January 1, 2021, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments of $180,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $750,578 at an effective interest rate of 10%. With respect to this lease, for 2022 Ogleby should record a. interest expense of $57,058. b. interest expense of $75,058. c. interest expense of $44,764. d. interest expense of $62,764.
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