Question

Sheridan Co. leased equipment to Union Co. on July 1, 2021, and properly recorded the sales-type lease at $146000, the present value of the lease payments discounted at 9%. The first of eight annual lease payments of $22000 due at the beginning of each year of the lease term was received and recorded on July 3, 2021. Sheridan had purchased the equipment for $113000. What amount of interest revenue from the lease should Sheridan report in its 2021 income statement

Answer 1

The amount of interest revenue from the lease should Sheridan report in its 2021 income statement is $5,580

Step-by-step explanation:

According to the given data The first payment will reduce the principle because interest has not started to accrue ,

Therefore= $146,000 - $22,000 = $124,000

The Computation of interest that will be owned for 6 months would be as follows:

Interest revenue for full year = $124,000*9% = $11,160

Therefore, the amount of interest revenue from the lease is = Interest revenue for full year*6/12

amount of interest revenue from the lease = $11,160*6/12 = $5,580 (from july to december)

The amount of interest revenue from the lease should Sheridan report in its 2021 income statement is $5,580