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At what amount the lease receivable be initially recognized

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Question - FOUR Inc. leases computer equipment to customers under a direct financing lease. The equipment has no residual value at the end of the lease and the leases do not contain bargain purchase options. FOUR wishes to earn 8% interest on a 5-year lease of equipment with a fair value of P323,400. The present value of an annuity due of 1 at 8% for 5 years is 4.312.

1. What is the total amount of interest revenue will FOUR earn over the term of the lease?

a. 51,600

b. 75,000

c. 129,360

d. 139,450

2. At what amount should the lease receivable be initially recognized?

a. 278,900

b. 323,400

c. 375,000

d. 1,617,000

Reference no: EM133088067

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