Instructions: Use the Present Value and Future Value Tables Included

Instructions: Use the present value and future value tables included in Appendix 8 and on the textbook companion website. A 10-year capital lease requiring payments of $25,000 per year is signed. The entry to record the first payment would probably include a A) Debit to Lease Obligation that is of a larger amount than the debit to Interest Expense B) Debit to Lease Obligation that is of a smaller amount than the debit to Interest Expense C) Debit to Lease Obligation that is of a smaller amount than the debit to Cash D) Debit to Lease Obligation that is of a larger amount than the credit to Cash

Instructions: Use the present value and future value tables included in Appendix 8 and on the textbook companion website. On January 1, Cromwell Corp. leased a mainframe computer from Fairview Company for $42,000 per year (payable on each December 31) for 10 years. The lease is a capital lease, and the current market rate of interest is 12 percent. The market value of the computer is $237,300, which is equal to its discounted present value at 12 percent. Given this data, interest expense on the lease for the first year is A) $42,000 B) $28,476 C) $25,200 D) $13,524