On January 1, 2018, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a sales-type lease. Calloway paid $200,000 for the machine and is leasing it to Zone for $31,000 per year, an amount that will return 8% to Calloway. The present value of the lease payments is $200,000. The lease payments are due each January 1, beginning in 2018. What is the appropriate interest entry on December 31, 2018?

Multiple Choice

• Cash13,520Interest receivable13,520
• Interest receivable13,520Interest revenue13,520
• Cash16,000Interest revenue16,000
• Interest receivable16,000Interest