Question:On January 1 of Year 1, XYZ Company leases some equipment from ABC Supply under a four-year operating lease. Lease payments of $20,000 are payable at the end of each year. The first payment is due on December 31 of Year 1. Using an interest rate of 11 percent, the present value of the four payments is $62,000 on January 1 of Year 1.

Given the above information, what expenses related to this lease would XYZ Company report on its Year 1 Income Statement? 

A Interest Expense of $6,820 and Depreciation Expense of $15,500 
B Rent Expense of $20,000 
C Interest Expense of $4,500 and Depreciation Expense of $15,500 
D Interest Expense of $6,820 and Depreciation Expense of $20,000 

+ Answer
C 

+ Explanation
Answer not sure

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Md. Habib Ullah

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