On December 31 of the Current Year,Johnson Corporation Leased Equipment

Multiple Choice

On December 31 of the current year,Johnson Corporation leased equipment to Kennedy Company for a five-year period.The annual lease payment is $40,585; the discount rate for this lease is 8%.Lease payments are due on December 31 of each year,and the first payment was made at the inception of the lease.The normal cash price for this type of equipment is $175,000; the cost to Johnson was $150,000.The expected life of the equipment is five years.For December 31 of the current year,what will be the increase to Johnson's pretax earnings due to this lease?

A) $10,753
B) $29,830
C) $35,000
D) $40,583