Question

Carrington Company agrees to make lease payments of $309.32 at the end of each month for 60 months for the use of equipment. The present value of the 60 lease payments using a 6% borrowing rate is $16,000. Total interest expense over the term of the lease is:

Answer 1

Answer: $2559,49

Explanation:

Please see the attached exercise, the result is the sum of the monthly interest paid.

Answer 2

The answer is $2559.20

Step-by-step explanation:

From the Question, we solve for the total expense over the term of the lease.

Given;

The amount of monthly lease payment = $ 309.32

The total number of monthly lease payment is = 60

Total lease of payment made over the term of lease = $ 309.32 * 60 =$18,559.20

The present value of the 60 lease payments = 6% ($16,000.00)

Now,

The total interest expense over the term of the lease = $18,559.20-$16,000.00) = $2559.20