Question

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Derozan Corp. manufactured equipment at a cost of $313,790 and leased it to B Corp. on January 1, 2019 for an eight-year period expiring December 31, 2026. The asset’s economic life is 10 years. Equal payments under the lease are $58,090 and are due on January 1 of each year. The first payment was made on January 1, 2019. The implicit rate used by Derozan is 8%.

Additional information:                                            

Present value of an annuity due of $1 for 8 periods at 8%          6.21                                      

Present value of an annuity due of $1 for 16 periods at 4%       12.12                                       

What is the amount of interest revenue Derozan will recognize for the year ended December 31, 2019?

Answer 1

B2 Xfdate 1/1/2019 $ 1/1/2020 S 1/1/2021 S 1/1/2022 $ 1/1/2023 S 1/1/2024 S 1/1/2025 $ 1/1/2026 S date opening balance installment interest revenue principal repayment closing balance 302,438 268,543 231,937 192,401 149,704 103,590 53,787 0 360,528 $58,090 302,438 58,090 268,543 $ 58,090 $ 231,937 58,090 192,401 $ 58,090 $ 149,704 58,090 103,590 $58,090 $ 53,787 58,0 24,195 $ 21,483 $ 18,555 $ 15,392 11,976 $ 8,287 $ 4,303 $ 58,090 33,895 S 36,607 $ 39,535 S 42,698 46,114 49,803 $ 53,787 S 4 10 90S 12 13 14 hence, amount of interest revenue Derozan will recognize for the year ended December 31, 2019 i $24,195

for formula view, refer to the next image -

B2 date opening balance installment interest revenue principal repayment closing balance 434661-PV(8%,8,58090,0,1) |58090 43831 G3 44197 G4 44562 |=G5 44927 G6 45292 G7 45658 -G8 46023 G9 D3-E3 D4-E4 D5-E5 D6-E6 D7-E7 C3-F3 -C4-F4 -C5-F5 -C6-F6 C7-F7 C8-F8 C9-F9 C10-F10 -C4*8% -c5*8% =C7*8% =C8*8% -C9*8% -С10*8% -D8-E8 D9-E9 D10-E10 hence, amount of interest revenue Derozan will recognize for the year ended December 31, 2019 is-E4 14

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