Headland Leasing Company agrees to lease machinery to Sage Corporation on January 1, 2017. The following information relates to the lease agreement.

1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2017, is $724,000.

3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $98,000. Sage depreciates all of its equipment on a straight-line basis.

4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017.

5. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.

6. Headland desires a 10% rate of return on its investments. Sages incremental borrowing rate is 11%, and the lessors implicit rate is unknown. (Assume the accounting period ends on December 31.)

Annual rental payment is 125,803

Present value of minimum lease payments is 705,220

Prepare the journal entries Headland would make in 2017 and 2018.

I'm specifically having trouble finding the interest revenue in this problem.

Prepare the journal entries Headland would make in 2017 and 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places e.g. 58,971) DateAccount Titles and Explanation Debit Credit Lease Receivable 724,000 Cost of Goods Sold 559,000 724,000) Sales Revenue 559,000 Inventory To record the lease.) Cash 125803 Lease Receivable 125803 To record lease payment.) 12/31/17 Interest Receivable 57942 Interest Revenue 57942 1/1/18 Cash 125803 Lease Receivable 67861