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Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2009. The manufacturing cost of the computers was $12 million.

This non-cancelable lease had the following terms:
• Lease payments: $2,466,754 semiannually; first payment at January 1, 2009; remaining payments at June 30 and December 31 each year through June 30, 2013.
• Lease term: 5 years (10 semi-annual payments)
• No residual value; no bargain purchase option
• Economic life of equipment: 5 years
• Implicit interest rate and lessee's incremental borrowing rate: 5% semi-annually
• Fair value of the computers at January 1, 2009: $20 million

Collectibility of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred. What is the interest revenue that Technoid would report on this lease in its 2009 income statement?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M998860

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