Solution 1:
Semiannual lease payment = $681,881
Total semiannual payments = 4*2 = 10
Incremental borrowing rate = 9%, 4.50% semiannual
Present value of minimum lease payments = Semi Annual lease payments * Cumulative PV Factor of annuity due for 8 periods at 4.50%
= $681,881 * 6.892701 = $4,700,000
Semiannual payment on 30.06.2021 = $509,761
Amount receivable on 30.06.2021 = ($4,700,000 - $681,881) = $4,018,119
Interest revenue for 31.12.2021 = $4,018,119 * 4.50% = $180,815
Semiannual lease payment on 31.12.2021 = $681,881
Pre tax amount of net receivables IC report in its balance sheet at December 31, 2021 = $4,018,119 + $180,815 - $681,881 = $3,517,053
Solution 2:
Pre tax amount of interest revenue IC report in its income statemetn for year ended Dec 31, 2021 = $4,018,119 * 4.50% = $180,815
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