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6 July, 20:00

On January 1, Year 1, 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 an operating lease. Assuming the interest rate for this lease is 9%, how much interest revenue will Savor record in Year 1 on this lease

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  1. 6 July, 23:33
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    The interest revenue will Savor record in Year 1 on this lease at 9% is $347,697

    Explanation:

    Present value of Lease Payment = $4,561,300

    Less: First Payment on Jan 1, 2018 = $698,000

    Remaining Balance = $3,863,300

    Interest Revenue for Year 1 at 9% = $3,863,300 * 9%

    Interest Revenue for Year 1 at 9% = $347,697
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Home » Business » On January 1, Year 1, 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.
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