Business, 04.05.2020 23:38 laurenlay156

On January 1, 2018, Penn Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Penn to make annual payments of $100,000 at the end of each year for ten years with title to pass to Penn at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Penn uses the straight-line method of depreciation of all of its fixed assets. Penn accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $671,008 at an effective interest rate of 8%. With respect to this finance lease, Penn should record for 2018

a. interest expense of $53,681 and depreciation expense of $44,734.

b. lease expense of $100,000.

c. interest expense of $45,681 and depreciation expense of $67,101

d. interest expense of $44,734 and depreciation expense of $38,068.

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On January 1, 2018, Penn Corporation signed a ten-year noncancelable lease for certain machinery. Th...

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