StatMed Corporation Leases Medical Equipment Under a Five-Year Capital Lease

question 36

Multiple Choice

StatMed Corporation leases medical equipment under a five-year capital lease. The terms of the lease call for five equal payments of $25,000, with the first payment due at the inception. The interest rate implicit in the lease is 8%. The first year's interest expense will be ________. (Do not round interim calculations and round your final answer to the nearest whole dollar.)

• A) $0
• B) $1000
• C) $6624
• D) $2000

---

Definitions:

Contribution Margin

The difference between the sales revenue of a company and its variable costs.

Fixed Budget

A budget that remains unchanged and is based on a fixed level of activity, regardless of actual levels of output, sales, or revenue throughout the budget period.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, allowing for more accurate financial planning and analysis.

Contribution Margin

The difference between sales revenue and variable costs, showing how much revenue contributes to covering fixed costs.