Reference no: EM132876643

Question - Superfast Company used leases as a method of selling its products. In 2018, the company completed construction of a jet plane. On January 1, 2018, the jet plane was leased to Jett W. on a contract specifying that ownership of the jet will transfer to the lessee at the end of the lease period. Cost of the jet plane 800,000 Fair value of the jet plane at commencement of lease 1,300,000 Lease payments payable in advance 150,000 Estimated residual value 200,000 Implicit interest rate 12% Date of first lease payment January 1, 2018 Lease term 20 years PV of an annuity due of 1 at 12% for 20 periods 8.37 PV of an ordinary annuity of 1 at 12% for 20 periods 7.47 PV of 1 at 12% for 20 periods 0.10.

Required -

1. What is the total interest that the company will earn over the lease term?

A. 1,744,500 B. 1,924,500 C. 1,944,500 D. 2,200,000

2. What is the total income derived by the company from the lease for the year 2018?

A. 455,500 B. 588,160 C. 606,160 D. 608,160