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On January 1, 2021, Cullumber Corporation signed a 10-year noncancelable lease for certain machinery. The...

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Accounting

On January 1, 2021, Cullumber Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Cullumber to make annual payments of $225000 at the end of each year for 10 years with the title passing to Cullumber at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Cullumber uses the straight-line method of depreciation for all of its fixed assets. Cullumber accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $1443973 at an effective interest rate of 9%. With respect to this lease, Cullumber should record for 2021

interest expense of $129958 and amortization expense of $96265.

interest expense of $111958 and amortization expense of $144397.

interest expense of $96265 and amortization expense of $82932.

lease expense of $129958.

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