Business, 11.08.2021 03:10 angoraspinner

On January 1, 2016, Mary Company leased equipment, signing a five-year lease that requires annual lease payments of $20,000. The lease qualifies as a capital lease. The payments are made at year-end, and the first payment will be made at December 31, 2016. In addition, Mary guarantees the residual value to be $8,000 at the end of the lease term. Mary correctly uses the lessor's implicit interest rate, which is 12%. The present value factors for five periods at 12% are as follows: Present value of $1 0.567427
Present value of ordinary annuity of $1 3.604776

Required:
a. What is the interest expense associated with the lease obligation for the year ending December 31, 2017?
b. If the Mary Company uses the straight-line method of depreciation for its assets, what is the amount of depreciation expense for the leased equipment for the year ending December 31, 2016?
c. What would be the debit to Leased Equipment under Capital Leases on January 1, 2016?
d. What is the amount of interest expense associated with the leased equipment for the year ending December 31, 2016?
b.

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On January 1, 2016, Mary Company leased equipment, signing a five-year lease that requires annual le...