Mega Corporation Leases Machinery on January 1, 2016

question 125

Multiple Choice

Mega Corporation leases machinery on January 1, 2016. The lease is for a period of 7 years, which is the useful life of the machinery. The implicit rate of interest is 10% and the Obligation under Capital Lease is recorded at $48,197. The lease requires annual payments of $9,000, with the first payment due at the inception of the lease. How much interest expense should be accrued on December 31, 2016?

• A) $3,920
• B) $0
• C) $9,000
• D) $4,820

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