Use the Following Information for Questions

question 66

Multiple Choice

Use the following information for questions.
On January 2, 2017, Cambridge Ltd.signed a ten-year non-cancellable lease for a heavy-duty drill press.The lease required annual payments of $35,000, starting December 31, 2017, with title passing to Cambridge at the end of the lease.Cambridge is accounting for this lease as a capital (finance) lease.The drill press has an estimated useful life of 20 years, with no residual value.Cambridge uses straight-line depreciation for all its plant assets.The lease payments were determined to have a present value of $215,000, based on an implicit interest rate of 10%.
-On their 2017 income statement, how much interest expense should Cambridge report in connection with this lease?

• A)$0
• B)$13,125
• C)$17,500
• D)$21,500

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Definitions:

Process Manufacturing Systems

Process manufacturing systems refer to the methods and equipment used in industries where products are produced in bulk by chemical, biological, or physical processes.