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What amount of interest expense should Crane report

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Question - On January 2, 2021, Crane, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $290000 starting at the beginning of the first year, with title passing to Crane at the expiration of the lease. Crane treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Crane uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1861121, based on implicit interest of 9%.

In its 2021 income statement, what amount of interest expense should Crane report from this lease transaction?

a. $141401

b. $153075

c. $186112

d. $0

Reference no: EM132537416

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