On January 1, 2021, Blossom Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for
Blossom to make annual payments of $210000 at the beginning of each year for 5 years beginning on January 1, 2021 with the title
passing to Blossom at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Blossom uses
the straight-line method of depreciation for all of its fixed assets. Blossom accordingly accounts for this lease transaction as a finance
lease. The lease payments were determined to have a present value of $861514 at an effective interest rate of 11%.
In 2021, Blossom should record interest expense of
$71667.
$138333.
$115233.
$94767.
