Sheridan Co. leased equipment to Union Co. on July 1, 2021, and properly recorded the sales-type lease at $146000, the present value of the lease payments discounted at 9%. The first of eight annual lease payments of $22000 due at the beginning of each year of the lease term was received and recorded on July 3, 2021. Sheridan had purchased the equipment for $113000. What amount of interest revenue from the lease should Sheridan report in its 2021 income statement

The amount of interest revenue from the lease should Sheridan report in its 2021 income statement is $5,580

Explanation:

According to the given data The first payment will reduce the principle because interest has not started to accrue ,

Therefore= $146,000 - $22,000 = $124,000

The Computation of interest that will be owned for 6 months would be as follows:

Interest revenue for full year = $124,000*9% = $11,160

Therefore, the amount of interest revenue from the lease is = Interest revenue for full year*6/12

amount of interest revenue from the lease = $11,160*6/12 = $5,580 (from july to december)

The amount of interest revenue from the lease should Sheridan report in its 2021 income statement is $5,580

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