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lapo4ka [179]
4 years ago
14

On January 1, 2021, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a sales-type lease. Calloway p

aid $280,000 for the machine and is leasing it to Zone for $38,000 per year, an amount that will return 9% to Calloway. The present value of the lease payments is $280,000. The lease payments are due each January 1, beginning in 2021. What is the appropriate interest entry on December 31, 2021
Business
1 answer:
Vilka [71]4 years ago
8 0

Answer:

Dr Interest receivable 21,780

Cr Interest revenue 21,780

Explanation:

Preparation of the appropriate interest Journal entry on December 31, 2021

Based on the information given we were told that the company paid the amount of $280,000 for the machine in which the company will be leasing the machine to Zone for the amount of $38,000 per year while 9% of the amount will be return to Calloway which means that the interest entry on December 31, 2021 will be recorded as:

Dr Interest receivable 21,780

Cr Interest revenue 21,780

Calculated as :

Cost of machine $280,000

Less lease amount per year $38,000

=$242,000

Hence,

$242,000*9%

=$21,780

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