In: Accounting
Amazon leased equipment from United Machines on July 1, 2020, in a finance lease. The present value of the lease payments discounted at 10% was $82,000. Ten annual lease payments of $12,000 are due each year beginning July 1, 2020. United Machines had constructed the equipment recently for $66,000. What net effect did the lease have on the income statement of United Machines for the year ending December 31, 2020? Ignore taxes. a. $23,000 b. $0 c. $16,000 d. $19,500 e. $3,500
Answer | |
Calculate interest revenue December 31, 2021 |
|
Interest revenue | (82000-12000)*10%*(1/2) |
Interest revenue | $ 3,500 |
Profit on sale | 82000-66000 |
Profit on sale | $ 16,000 |
Amount reported in income statement | 3500+16000 |
Amount reported in income statement | $ 19,500 |
Thus, amount Smith co record in income statement is $19,500 | |
Option D : $19,500 |