Question

Suppose an operating lease calls for annual payments of $500,000 for six years. If you were...

Suppose an operating lease calls for annual payments of $500,000 for six years. If you were to capitalize that lease, what would be the interest expense on the Income Statement in Year 3? Assume a discount rate of 6%.

A.

$86,723
B.

$103,953
C.

$118,552
D.

$72,851
E.

$99,854
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Answer #1

Correct answer: B. 103,953

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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