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22 May, 22:38

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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  1. 22 May, 22:58
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    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
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Home » Business » 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.
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