Question
IUB Inc. uses leases as a means of financing sales of its equipment. IUB leased a machine to Chase Corp. for $15,000 per year, payable
IUB Inc. uses leases as a means of financing sales of its equipment. IUB leased a machine to Chase Corp. for $15,000 per year, payable at the beginning of each year, for a 10-year period. The cost of the machine to IUB was $86,000. The fair value of the machine at the date of the lease was $100,000, equal to the present value of minimum lease payments. Assume a residual value of $0 at the end of the lease.
Give the entry required to record the lease on IUBs books.
How much gross profit will IUB recognize initially on the lease? (Dont include any interest revenue.)
How much interest revenue will IUB recognize in the first year?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started