On January 1, 2013, Calloway Company leased a machine to Zone Corporation. The l

Question

On January 1, 2013, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a direct financing lease. Calloway paid $290,000 for the machine and is leasing it to Zone for $40,000 per year, an amount that will return 10% to Calloway. The present value of the minimum lease payments is $290,000. The lease payments are due each January 1, beginning in 2013. What is the appropriate interest entry on December 31, 2013?

chose correct answer

A
Intrest recievable 29,000
Intrest revenue 29,000

B
Intrest recievable 25,000
Intrest revenue 25,000

C
Cash 29,000
intrest revenue 29,000

D
Cash 25,000
intrest recievable 25,000

Explanation / Answer

B

Intrest recievable 25,000 ( (290000 - 40000) * 10%)

Intrest revenue 25,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.