[piggyqueenie]

I need a little help with this question:
Farm Co. leased equipment to Union Co. on July 1, Year 1 and properly recorded the sales-type lease at $135,000, the present value of the lease payments discounted at 10%. The first of eight annual lease payments of $20,000 due at the beginning of each year was received and recorded on July 3, Year 1. Farm had purchased the equipment for $110,000. What amount of interest revenue from the lease should Farm report in its Year 1 income statement?
a) 5,750
b) 5,500
c) 0
d) 6,750
I get how to calculate the problem to get the correct answer A) 5,750, but no where in the module in Becker does it talk about any subsequent journal entries for a sales-type lease so I assumed the answer would be zero…
Do I just do the subsequent journal entry similar to the one under a direct financing lease?

Thanks!

[piggyqueenie]

Hey guys! I am sitting for my first exam at the end of July and I am having a pretty hard time with Time Value of Money questions in FAR. I understand the material when going over the lecture but when I go read a MC question, I have no direction on where to start because it seems the methodology of completing each question changes each year. If anyone has any tips on tackling these questions or maybe like a cheat sheet on what to do when reading one of these questions, that would be an immense help! I want to move on to the next section but the Bonds section is next and it kind of falls back on the Time Value of Money section.

Thanks so much!!

[Author]

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