A finance lease agreement calls for quarterly lease payments of $4,625 over a 15-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $164,000.
a.Prepare a partial amortization table up to the October 1 payment
. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1?
Answer | |||||
Explanation : | |||||
a) | |||||
Date | Beginning Lease payment | Add :Interest 8% | Total amount due | Less : amount paid | Ending Balance |
01-Jul | $ 1,64,000.00 | $ - | $ 1,64,000.00 | $ 4,625.00 | $ 1,59,375.00 |
01-Oct | $ 1,59,375.00 | $ 3,187.50 | $ 1,62,562.50 | $ 4,625.00 | $ 1,57,937.50 |
(1$159,375*8%/4) | |||||
b) | |||||
Interest Expense (revenue) to be reported $3,187.50, would be recorded, with the second quarterly payment on October 1. |
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