Water Co. leased machine from Air Co. on July 1, 2018 for an 8-year period expiring June 30, 2026. Equal payments under the lease are $60,000 and are due on July 1 of each year. The first payment was made on July 1, 2018. The rate of interest contemplated by Zinc and Helium is 10%. The cash selling price of the equipment is $352,000 and the cost of the equipment on Helium's accounting records is $280,000. The lease is appropriately recorded as sales-type lease. What is the amount of interest revenue that Helium should record for the year ended December 31, 2018?
Water Co. leased machine from Air Co. on July 1, 2018 for an 8-year period expiring June 30, 2026. Equal payments under the lease are $60,000 and are due on July 1 of each year. The first payment was made on July 1, 2018. The rate of interest contemplated by Zinc and Helium is 10%. The cash selling price of the equipment is $352,000 and the cost of the equipment on Helium's accounting records is $280,000. The lease is appropriately recorded as sales-type lease. What is the amount of interest revenue that Helium should record for the year ended December 31, 2018?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Water Co. leased machine from Air Co. on July 1, 2018 for an 8-year period expiring June 30, 2026. Equal payments under the lease are $60,000 and are due on July 1 of each year. The first payment was made on July 1, 2018. The rate of interest contemplated by Zinc and Helium is 10%. The cash selling price of the equipment is $352,000 and the cost of the equipment on Helium's accounting records is $280,000. The lease is appropriately recorded as sales-type lease. What is the amount of interest revenue that Helium should record for the year ended December 31, 2018?
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The cash selling price is the actual sales price of the asset and the interest shall be charged on the same basis only.
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