Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 10% was $81,100. Ten annual lease payments of $12,000 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $66,000, and its retail fair value was $81,100. Under the new ASU, what amount of interest revenue from the lease should Smith Co. report in its December 31, 2016, income statement?
A - $12,000.
B - $4,000.
C - $3,400.
D - $5,000.
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