Knottworth Gedding Consulting leased machinery from Red Inc. on July 1, 2018. The lease was recorded as a finance lease. The present value of the lease payments discounted at 10% was $40.5 million. Ten annual lease payments of $6 million are due each July 1 beginning July 1, 2018. What amount of interest expense from the lease should Knottworth Gedding report in its December 31, 2018, income statement? $2,025,000 $1,725,000 $1,650,000 $0 Can anyone please explain to me why this one count interest expense at the end of the year? Since it only made payment on July 1, 2018. Didn't they need to wait till next year 2019 to make 2nd payment. Please help to me to explain this. Thank you
Knottworth Gedding Consulting leased machinery from Red Inc. on July 1, 2018. The lease was recorded as a finance lease. The present value of the lease payments discounted at 10% was $40.5 million. Ten annual lease payments of $6 million are due each July 1 beginning July 1, 2018. What amount of interest expense from the lease should Knottworth Gedding report in its December 31, 2018, income statement?
$2,025,000
$1,725,000
$1,650,000
$0
Can anyone please explain to me why this one count interest expense at the end of the year? Since it only made payment on July 1, 2018. Didn't they need to wait till next year 2019 to make 2nd payment. Please help to me to explain this. Thank you
Why are we taking into account in the interest rate?