Question
Harter Company leased machinery to Stine Company on January 1, 2025, for a ten-year period expiring December 31, 2034. Equal annual payments under the lease
Harter Company leased machinery to Stine Company on January 1, 2025, for a ten-year period expiring December 31, 2034. Equal annual payments under the lease are $250,000 and are due on July 1 of each year. The first payment was made on January 1, 2025. The rate of interest used by Harter and Stine is 9%. The lease receivable before the first payment is $1,750,000 and the cost of the machinery on Harters accounting records was $1,550,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Harter, what amount of interest revenue would Harter record for the year ended December 31, 2025?
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