Question
On January 1, 2018, Billy purchased a customized asset for $280,000 (fair value on purchase date) and leased it to Steven for 6 years. Other
On January 1, 2018, Billy purchased a customized asset for $280,000 (fair value on purchase date) and leased it to Steven for 6 years.
Other info:
Billy Year end Dec. 31
Lease term = 6 years
The payments are due annually, and first payment on purchase date (January 1, 2018)
Economic life = 8 years
Billys rate =8%
Billys rate not including initial direct cost = 6%
Steven has the option to buy the asset for $12,000 at the end of the lease term, residual value=$35,000, Billy is required Steven to guarantee 75% of the residual value.
Billy pays $4,000 in commissions to arrange lease
Q: If Billy is a Financial Institution, how much FINANCE INCOME is recorded at end of 2018?
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