A lease agreement calls for quarterly lease payments of $6,800 over a 12-year le

Question

A lease agreement calls for quarterly lease payments of $6,800 over a 12-year lease term, with the first payment at July 1, the lease’s inception.

3. value: 2.00 points A lease agreement calls for quarterly lease payments of $6,800 over a 12-year lease term, with the first payment at July 1, the lease's inception. The interest rate is 8%. Both the fair value and the cost of the asset to the lessor are $165,000 What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment at October 1? Lease Payment crease in Outstanding balance Date July 1 July 1 October 1 Interest balance What would be the amount of interest revenue the lessor would record in conjunction with the second quarterly payment at October 1? nterest revenue

Explanation / Answer

Ans;

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

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