Use the Following Information for Questions

question 14

Multiple Choice

Use the following information for questions.
On January 1, 2011, Ogleby Corporation signed a five-year noncancelable lease for equipment.The terms of the lease called for Ogleby to make annual payments of $60,000 at the end of each year for five years with title to pass to Ogleby at the end of this period.The equipment has an estimated useful life of 7 years and no residual value.Ogleby uses the straight-line method of depreciation for all of its fixed assets.Ogleby accordingly accounts for this lease transaction as a finance lease.The minimum lease payments were determined to have a present value of $227,448 at an effective interest rate of 10%.
-With respect to this capitalized lease, for 2012 Ogleby should record

• A)interest expense of $22,745 and depreciation expense of $32,493.
• B)interest expense of $20,469 and depreciation expense of $32,493.
• C)interest expense of $19,019 and depreciation expense of $32,493.
• D)interest expense of $14,469 and depreciation expense of $32,493.

---

Definitions:

Discriminate in Prices

The practice of charging different prices to different consumers for the same product or service, based on various factors such as willingness to pay, location, or purchase volume.

Unlawful

Actions or conduct that are not permitted by law and could lead to legal penalties.

Fair Trade Act

Legislation aimed at ensuring producers in developing countries are paid fair prices for their goods.

Consumerism

An economic and social system that promotes the continuous increase in purchasing and consuming goods and services.