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On January 1, 2018, Savor Corporation leased equipment to Spree Company. The lease term is 9...

On January 1, 2018, Savor Corporation leased equipment to Spree Company. The lease term is 9 years. The first payment of $698,000 was made on January 1, 2018. The present value of the lease payments is $4,561,300. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 9%, how much interest revenue will Savor record in 2018 on this lease?

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Answer #1
Present value of the lease payment = $              45,61,300
First payment is made as on January 01 , 2018 of $ 698,000
So the interest on this amount will be not charged = $              -6,98,000
Net Value for the interest Charged on lease $              38,63,300
Interest @ 9% on $ 38,63,300 = $                3,47,697
So, Interest revenue on lease for the year 2018 = $                3,47,697
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