Question
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2016. The manufacturing cost of the computers was $19 million.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2016. The manufacturing cost of the computers was $19 million. |
This non-cancelable lease had the following terms: |
Lease payments: $2,726,627 semiannually; first payment at January 1, 2016; remaining payments at June 30 and December 31 each year through June 30, 2020. | |
Lease term: 5 years (10 semi-annual payments). | |
No residual value; no bargain purchase option. | |
Economic life of equipment: 5 years. | |
Implicit interest rate and lessee's incremental borrowing rate: 4% semi-annually. | |
Fair value of the computers at January 1, 2016: $23 million. |
Collectibility of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred. |
What is the interest revenue that Technoid would report on this lease in its 2016 income statement? (Round your answer to the nearest dollar.) A. $0 B. $1,545,242 C. $820,939 D. None of these answer choices are correct |
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