Question
DeRozan Corp. manufactured equipment at a cost of $331,001 and leased it to B Corp. on January 1, 2019, for an eight-year period expiring December
DeRozan Corp. manufactured equipment at a cost of $331,001 and leased it to B Corp. on January 1, 2019, for an eight-year period expiring December 31, 2026. The assets economic life is 10 years. Equal payments under the lease are $63,400 and are due on January 1 of each year. The first payment was made on January 1, 2019. The implicit rate used by Derozan is 8%.
Additional information:
Present value of an annuity due of $1 for 8 periods at 8% 6.21
Present value of an annuity due of $1 for 16 periods at 4% 12.12
What is the amount of interest revenue Derozan will recognize for the year ended December 31, 2019?
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