Brief Exercise 15-10 Sales-type lease; lessor; income statement effects [LO15-6] A lease agreement that qualifies as a capital lease calls for annual lease payments of $20,000 over a five- year lease term, with the first payment at January 1, the lease's inception. The interest rate is 4%. Assume the asset being leased cost the lessor $80,000 to produce. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Determine the price at which the lessor is "selling" the asset (present value of the lease payments). PV factors based on Table or Calculator function: PVAD of $1 Lease Payment $ 20,000 n = 5 i = PV of Lease $ 4.0% 92,598 What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)? Date Cash Interest Received Interest Revenue Decrease in Balance Outstanding Balance 01/01/2016 $ 92,598 01/01/2016 $ 20,000 $ 0 $ 20,000 72,598 01/01/2017 20,000 2,904 17,096 55,502 Pretax impact on income related to the lease: Cost of goods sold $ 80,000 Interest revenue $ 2,904 Sales revenue Total pretax impact on income