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How much is the total interest income

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Question - On January 1, 20x1, VACILLATE Financing Co. leased equipment to HESITATE, Inc. Information on the lease is shown below.

Cost of equipment 1,394,740

Useful life of equipment 5 years

Lease term 4 years

Annual rent payable at the start of each year 400,000

Interest rate implicit in the lease 10%

Required -

1. How much is the total interest income (finance income) to be recognized by VACILLATE over the lease term?

a. 400,000 c. 205,260

b. 605,260 d. 365,260

2. How much is the carrying amount of the net investment in the lease as of December 31, 20x1?

a. 694,215 c. 735,260

b. 1,094,215 d. 1,165,260

Reference no: EM133155266

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