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How much is the total interest income to be earned

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On January 1, 2018, Money Co., a dealer of machines, leased a machine to For Nothing Co. Data relating to the lease is as follows:

Cost of the machinery #900,000

Useful life of equipment 5

Lease term 4

Annual rent payable at the end of the year 300,000

Interest rate implicit in the lease 8%

Residual value guarantee 50,000

Initial direct I cost 10,000

The leased asset reverts to Money Co. at the end of the lease term. The lease is appropriately recorded as sales type lease.

Problem 1. How much is the total interest income to be earned over the lease term?

Reference no: EM132819786

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