Question

Source Inc. (lessor) entered in a lease agreement of equipment for a 5-year period with Lemon Inc. (lessee). The lease is properly classified as an operating lease by Source Inc. Lease payments were structured as follows: Year One: $6,000 Year Two: $12,000 Year Three: $10,000 Year Four: $10,000 Year Five: $12,500 What is the amount of lease revenue recognized in Year One and Year Two by Sorenstam Inc.

Answer 1

the amount of lease revenue recognized is $10,100

Step-by-step explanation:

The computation of the amount lease revenue recognized in Year One and Year Two by Sorenstam Inc. is shown below:

= (First year payment + second year payment + third year payment + fourth year payment + fifth year payment) ÷ number of years

= ($6,000 + $12,000 + $10,000 + $10,000 + $12,500) ÷ 5 years

= $10,100

Hence, the amount of lease revenue recognized is $10,100