Use the Following Information for Questions 65 and 66

question 12

Multiple Choice

Use the following information for questions 65 and 66.
On January 1, 2014, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments of $90,000 at the beginning of each year for five years with title passing to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby uses the straight-line method of depreciation for all of its fixed assets. Ogleby accordingly accounts for this lease transaction as a capital lease. The minimum lease payments were determined to have a present value of $375,289 at an effective interest rate of 10%.
-With respect to this capitalized lease, for 2014 Ogleby should record

• A) rent expense of $90,000.
• B) interest expense of $28,529 and depreciation expense of $75,058.
• C) interest expense of $28,529 and depreciation expense of $53,613.
• D) interest expense of $45,000 and depreciation expense of $90,978.

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Definitions:

Absorbs

The process of taking in or soaking up energy or material from the environment, such as light, heat, or moisture, through physical or chemical means.

Free Energy

A thermodynamic quantity representing the amount of energy in a system that is available to do work at a constant temperature and pressure.

Reactants

Substances initially present in a chemical reaction that are consumed during the reaction to make products.

Products

The substances that result from a chemical reaction, found on the right side of a chemical equation.