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he asset's fair value was $1,200,000 and the lease term is eight years e inception of the lease. The residual value of the asset of $200,000 nown to Nevue) is 5%, and Nevue's incremental borrowing rate is 4%

he asset's fair value was $1,200,000 and the lease term is eight years e inception of the lease. The residual value of the asset of $200,000 nown to Nevue) is 5%, and Nevue's incremental borrowing rate is 4%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, Year 5, McLaughlin Co. leased an asset to Nevue Corp. McLaughlin uses ASPE for reporting purposes. The asset's fair value was $1,200,000 and the lease term is eight years with the first lease payment of $156,878 payable at the inception of the lease. The residual value of the asset of $200,000 is unguaranteed. The rate implicit in the lease (known to Nevue) is 5%, and Nevue's incremental borrowing rate is 4%. Which of the following represents the amount of interest income that McLaughlin should report for the year ended December 31, Year 6? A. 43509 B. 52156 C. 57465 D. 60000
Transcribed Image Text:On December 31, Year 5, McLaughlin Co. leased an asset to Nevue Corp. McLaughlin uses ASPE for reporting purposes. The asset's fair value was $1,200,000 and the lease term is eight years with the first lease payment of $156,878 payable at the inception of the lease. The residual value of the asset of $200,000 is unguaranteed. The rate implicit in the lease (known to Nevue) is 5%, and Nevue's incremental borrowing rate is 4%. Which of the following represents the amount of interest income that McLaughlin should report for the year ended December 31, Year 6? A. 43509 B. 52156 C. 57465 D. 60000
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