Question
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $18 million.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms:
Lease payments: $2,713,429 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025.
Lease term: 5 years (10 semiannual payments).
No residual value; no purchase option.
Economic life of equipment: 5 years.
Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually.
Fair value of the computers at January 1, 2021: $22 million.
What is the interest revenue that Technoid would report for this lease in its 2021 income statement?
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