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What is the amount of interest income

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Question 1: AAA Limited, with 31 December financial year-ends, leases out a machine on 1 January 20X1 on a finance lease. The machine has a fair value of $50,000. The annual fixed lease payments of $19,753 will be receivable on 31 December 20X1, 31 December 20X2, and 31 December 20X3. The implicit rate of interest is 9%. Using the effective interest method, what is the amount of interest income (rounded to the nearest dollar) earned by AAA Limited in the year ending 31 December 20X2?

Option A. $1,777.

Option B. $3,127.

Option C. None of the listed options.

Option D. $4,500.

Reference no: EM132489610

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