Titanic Corporation leased executive limos under terms of $20,000 down and four equal annual payments of $30,000 on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be:
A)$13,200.
B)$10,238.
C)$33,200.
D)$15,543.PVA = $30,000 x 3.10245* = $93,074 $93,074 x 11% = $10,238
*PVA of $1: n=4; i=11%

Question

Quizplus · Accepted Answer

To calculate the interest expense for the first year, we need to find the present value of the lease payments, which would be $93,074. This can be calculated using the PVA formula with n=4, i=11%, and PMT= $30,000. 
PVA = $30,000 x 3.10245 = $93,074 
Then, we can calculate the interest expense for the first year by multiplying the present value by the interest rate of 11%, which would be $10,238. So, option B is the correct answer.

Titanic Corporation Leased Executive Limos Under Terms of $20,000 Down