Titanic Corporation leased executive limousines under terms of $110,000 to be paid at the inception of the lease, and four equal annual payments of $120,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be

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Business

Savanah Odonnell

2 March, 08:21

Titanic Corporation leased executive limousines under terms of $110,000 to be paid at the inception of the lease, and four equal annual payments of $120,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be

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Jaden Norman · Answer 1

First year Interest rate expenses = 11% * $590,000 = $64,900

Explanation:

Total leased payment = deposit + total instalment

= $110,000 + 4 (120,000)

= $110,000 + $480,000

= $590,000