Question
Elba Company leased machinery to Conecuh Company on January 1, 2017, for a ten-year period expiring December 31, 2026. Equal annual payments under the lease
Elba Company leased machinery to Conecuh Company on January 1, 2017, for a ten-year period expiring December 31, 2026. Equal annual payments under the lease are $300,000 and are due on January 1 of each year. The first payment was made on January 1, 2017. The rate of interest used by Elba and Conecuh is 9%. The cash selling price of the machinery is $2,100,000 and the cost of the machinery on Elba's accounting records was $1,860,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Elba, what amount of interest revenue would Elba record for the year ended December 31, 2017?
A. | $0 | |
B. | $162,000 | |
C. | $189,000 | |
D. | $81,000 |
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