Happy Corporation Leased a Building from Sensor Company

question 123

Multiple Choice

Happy Corporation leased a building from Sensor Company.The 10-year lease is recorded as a capital lease.The annual payments are $10,000 and the recorded cost of the asset is $67,100.The straight-line method is used to calculate depreciation.Which of the following statements is true?

• A) Depreciation expense of $6,710 will be recorded each year.
• B) Depreciation expense of $10,000 will be recorded each year.
• C) No depreciation expense will be recorded by Happy Corporation.
• D) No interest expense will be recorded by Happy Corporation.

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