Haystack, Inc

question 28

Multiple Choice

Haystack, Inc.manufactures machinery used in the mining industry.On January 2, 2016 it leased equipment with a cost of $200,000 to Silver Point Co.The 5-year lease calls for a 10% down payment and equal annual payments at the end of each year.The equipment has an expected useful life of 5 years.Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double-declining balance method.The selling price of the equipment is $325,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co.What is the amount of interest expense recorded by Silver Point Co.for the year ended December 31, 2016?

• A)$29,250
• B)$23,400
• C)$26,000
• D)$32,500