A lease agreement calls for quarterly lease payments of $5,700 over a 12-year le

Question

A lease agreement calls for quarterly lease payments of $5,700 over a 12-year lease term, with the first payment at July 1, the lease’s inception. The interest rate is 12%. Both the fair value and the cost of the asset to the lessor are $154,000. What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment at October 1? What would be the amount of interest revenue the lessor would record in conjunction with the second quarterly payment at October 1?

Explanation / Answer

Year Opening Principal Interest [12%] Rental Principal Paid [ Rental - Intt] C/fwd [opening principal - Principal paid] 1-Jul 154000 4620 [$154000*12%*3/12m] 5700 1080 152920 1-Oct 152920 4587.6 [$152920*12%*3/12m] 5700 1112.4 151807.6 Interest Expense for lesser for 2nd Quaterly Payment = $ 4588 Interest Income for lessee for 2nd Quaterly Payment = $ 4588

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.