Question - On January 1, 2019, Coleus Corporation entered into a ten-year lease agreement to be accounted for as a finance lease under ASC 842. The following summarizes the agreement:
• Payments of $30,000 are due at the beginning of each year; the first payment was made on January 1, 2019.
• The leased asset has an estimated useful life of 15 years.
• The implicit interest rate in the lease is known by Coleus to be 10%.
• Coleus's incremental borrowing rate is 12%.
• Coleus uses the straight-line depreciation method.
• The asset's estimated salvage value is $50,000 after 10 years and is $15,000 after 15 years.
Required:
1. Determine the interest expense associated with the lease for the year ended December 31, 2019.
2. Determine the amortization expense for the year ended December 31, 2019.