On January 1, 2018, Savor Corporation leased equipment to Spree Company. The lease term is 9 years. The first payment of $698,000 was made on January 1, 2018. The present value of the lease payments is $4,561,300. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 9%, how much interest revenue will Savor record in 2018 on this lease?

Question

Business

Lynn

27 December, 00:23

On January 1, 2018, Savor Corporation leased equipment to Spree Company. The lease term is 9 years. The first payment of $698,000 was made on January 1, 2018. The present value of the lease payments is $4,561,300. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 9%, how much interest revenue will Savor record in 2018 on this lease?

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Lobster · Answer 1

The interest revenue that Savor will record in 2018 on this lease is $347,697

Explanation:

Present value of the lease payment $45,61,300

First payment is made as on January 01, 2018 $ 698,000

the interest on this amount will be not charged - $6,98,000

Net Value for the interest Charged on lease $38,63,300

Interest @ 9% on $ 38,63,300 $347,697

Interest revenue on lease for the year 2018 $347,697

Therefore, The interest revenue that Savor will record in 2018 on this lease is $347,697