Question

King salons leased equipment from smith co on july 1 in a finance lease. the present value of the lease payments discounted at 12% was 79100. ten annual lease payments of 12500 are due beginning july 1 2021. smith co had constructed the equipment recently for 69500 and its retail fair vlue was 79100.

Required:
1. What amount of interest revenue from the lease should smith co report in its dec 31 2021 income statment?

Answer 1

The amount of interest revenue is $ 3,996.

Step-by-step explanation:

The Lease receivable at December 31,2021 is =79,100-12,500=66,600

Acording to the details The X Interest rate is 12% and The X Fraction of year is 6/12.

Hence, the calculation of The Interest revenue in December 31,2021 is =

=66,600×12%×6/12= $ 3,996 is the amount of interest revenue from the lease should smith co report in its dec 31 2021 income statment