Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 10% was $81,100. Ten annual lease payments of $12,000 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $66,000, and its retail fair value was $81,100. What amount did Smith Co. record in its income statement for the reporting year ending December 31, 2021, in connection with the lease? (ignore taxes.)
Calculate interest revenue December 31, 2021 | |||
Interest revenue | (81100-12000)*10%*(1/2) | ||
Interest revenue | $3,455 | ||
Profit on sale | 81100-66000 | ||
Profit on sale | $15,100 | ||
Amount reported in income statement | 3455+15100 | ||
Amount reported in income statement | $18,555 | ||
Thus, amount Smith co record in income statement is $18,555 | |||
Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The...
Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 8% was $61,600. Ten annual lease payments of $8,500 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $53,500, and its retail fair value was $61,600. What amount of interest revenue from the lease should Smith Co. report in its December 31, 2021, income statement? Multiple Choice $8,500. $3,080....
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