Question
Bryant leased equipment that had a retail cash selling price of $620,000 and a useful life of five years with no residual value. The lessor
Bryant leased equipment that had a retail cash selling price of $620,000 and a useful life of five years with no residual value. The lessor paid $540,000 to acquire the equipment and used an implicit rate of 8% when calculating annual lease payments of $143,780 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incremental costs of consummating the lease transaction incurred by the lessor were $16,000. What is the effect of the lease on the lessor's earnings during the first year (ignore taxes)? (Input decreases to income as negative amounts. Round Interest revenue to the nearest whole dollar.)
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