The estimated salvage value of the machine at the end of 10, Ask an Expert

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On January 1, Year 4, Jaffe Co. leased a machine to Pender Co. for 10 years, with $10,000 payments due at the beginning of each year effective at the inception of the lease. The machine cost Jaffe $55,000. The lease is appropriately accounted for as a sales-type lease by Jaffe. The present value of the 10 rent payments over the lease term discounted appropriately at 10% was $67,600. The estimated salvage value of the machine at the end of 10 years is equal to the disposal costs. How much interest revenue should Jaffe record from the lease for the year ended December 31, Year 4?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M974050

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