On January 1, 2016, Princess Corporation leased equipment to King Company. The lease term is 11 years. The first payment of $724,000 was made on January 1, 2016. The equipment cost Princess Corporation $4,332,600. The present value of the minimum lease payments is $4,652,600. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 13%, how much interest revenue will Princess record in 2017 on this lease?

On January 1, 2016, Princess Corporation leased equipment to King Company. The lease term is 11 years. The first payment of $724,000 was made on January 1, 2016. The equipment cost Princess Corporation $4,332,600. The present value of the minimum lease payments is $4,652,600. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 13%, how much interest revenue will Princess record in 2017 on this lease?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
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