Use the Following Information for Questions 31-32

question 20

Multiple Choice

Use the following information for questions 31-32.
On January 2, 2020, Cruise Ltd. signed a ten-year non-cancellable lease for a heavy-duty drill press. The lease required annual payments of $ 52,500, starting December 31, 2020, with title passing to Cruise at the end of the lease. Cruise 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. Cruise uses straight-line depreciation for all its plant assets. The lease payments were determined to have a present value of $ 352,279, based on an implicit interest rate of 8%.
-On their 2020 income statement, how much interest expense should Cruise report in connection with this lease?

• A) $ 0
• B) $ 14,091
• C) $ 42,000
• D) $ 28,182

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