Exhibit 20-4 on January 1, 2016, Average Leasing Company Entered into a into a Direct

Exhibit 20-4
On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:
-Refer to Exhibit 20-4. What is the amount of interest revenue that Average should recognize on the lease for the year ended December 31, 2016 round the answer to the nearest dollar) ?

A) $37,017
B) $28,017
C) $36,336
D) $27,336

Correct Answer:

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