Question

Cullumber Co. leased equipment to Union Co. on July 1, 2021, and properly recorded the sales-type lease at $131,000, the present value of the lease payments discounted at 10%. The first of eight annual lease payments of $19,600 due at the beginning of each year of the lease term was received and recorded on July 1, 2021. Cullumber had purchased the equipment for $120,000. What amount of interest revenue from the lease should Cullumber report in its December 2021 income statement

Answer 1

Answer:

$5,570

Explanation:

Calculation of the amount of interest revenue from the lease that Cullumber should report in its December 2021 income statement

Interest Revenue= (Sales-type lease -Annual lease payments)× lease payments discount × Numbers of month

Hence,

Interest Revenue= ($131,000 – $19,600) × .10 × 6/12

Interest Revenue =$111,400×.10×6/12

Interest Revenue =$5,570

Therefore the amount of interest revenue from the lease that Cullumber should report in its December 2021 income statement would be $5,570