On January 1, 2018, Billy purchased a customized asset for $280,000 (fair value on purchase date) and leased it to Steven for 6 years. Other info: Billy Year end Dec. 31 Lease term = 6 years The payments are due annually, and first payment on purchase date (January 1, 2018) Economic life = 8 years Billys rate =8% Billys rate not including initial direct cost = 6% Steven has the option to buy the asset for $12,000 at the end of the lease term, residual value=$35,000, Billy is required Steven to guarantee 75% of the residual value. Billy pays $4,000 in commissions to arrange lease Q: If Billy is a Financial Institution, how much FINANCE INCOME is recorded at end of 2018?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

On January 1, 2018, Billy purchased a customized asset for $280,000 (fair value on purchase date) and leased it to Steven for 6 years.

Other info:

Billy Year end Dec. 31

Lease term = 6 years

The payments are due annually, and first payment on purchase date (January 1, 2018)

Economic life = 8 years

Billys rate =8%

Billys rate not including initial direct cost = 6%

Steven has the option to buy the asset for $12,000 at the end of the lease term, residual value=$35,000, Billy is required Steven to guarantee 75% of the residual value.

Billy pays $4,000 in commissions to arrange lease

Q: If Billy is a Financial Institution, how much FINANCE INCOME is recorded at end of 2018?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education