s discounted at 10% was $53,553. The lease includes seven annual payments of $10,000. which expires every July 1, beginning year 1. LLL Co has built this equipment at a cost of $52,000 and its market value is $53,553. What amount of interest income must the company recognize in its statement of income and expenses for year 31 of year 1?
s discounted at 10% was $53,553. The lease includes seven annual payments of $10,000. which expires every July 1, beginning year 1. LLL Co has built this equipment at a cost of $52,000 and its market value is $53,553. What amount of interest income must the company recognize in its statement of income and expenses for year 31 of year 1?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
ZZ Co leased equipment from LLL Co on July 1, Year 1 under a lease classified as a finance lease. The present value of the lease payments discounted at 10% was $53,553. The lease includes seven annual payments of $10,000. which expires every July 1, beginning year 1. LLL Co has built this equipment at a cost of $52,000 and its market value is $53,553. What amount of interest income must the company recognize in its statement of income and expenses for year 31 of year 1?
A) $10,000
B) $5,355
C) $4,355
D) 2,178
Expert Solution
Step 1
Interest income is income recognized by the lessor . The lessor earns the income leasing his asset to the lessee. The interest income is calculated on the present value of the lease payments less payments.
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