Multiple Choice
On January 1, 2021, Freshbooks Industries signed an 18-year lease for heavy equipment. The lease is accounted for by Freshbooks as a finance lease. The lease required annual payments of $19,000 beginning December 31, 2021. The heavy equipment has an estimated useful life of 20 years, with $2,000 residual value. Freshbooks uses straight-line depreciation for all its plant assets. The lease payments have a present value of $159,000, based on a 10% interest rate
-How much interest expense should Freshbooks report for the lease on its 2021 income statement?
A) $19,000
B) $1,900
C) $14,000
D) $15,900
E) NONE
Correct Answer:
Verified
Correct Answer:
Verified
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