Farm Co. leased equipment to Union Co. on July 1, year 1, and properly recorded the sales-type lease at $135,000, the present value of the lease payments discounted at 10%. The first of eight annual lease payments of $20,000 due at the beginning of each year was received and recorded on July 3, year 1. Farm had purchased the equipment for $110,000. Farm has a December 31 year-end. What amount of interest revenue from the lease should Farm report in its year 1 income statement?

$5,500

$5,750

$6,750

$0