Use the Following Information for Questions

question 83

Multiple Choice

Use the following information for questions.
On January 1, 2011, Sauder Corporation signed a five-year noncancelable lease for equipment.The terms of the lease called for Sauder to make annual payments of $50,000 at the beginning of each year for five years with title to pass to Sauder at the end of this period.The equipment has an estimated useful life of 7 years and no residual value.Sauder uses the straight-line method of depreciation for all of its fixed assets.Sauder accordingly accounts for this lease transaction as a finance lease.The minimum lease payments were determined to have a present value of $208,493 at an effective interest rate of 10%.
-In 2012, Sauder should record interest expense of

• A)$10,849.
• B)$12,434.
• C)$15,849.
• D)$17,434.

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