Elton Electronics leases testing equipment to Startup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $118,000. The cost of the equipment to Elton is $113,000 and the expected life of the testing equipment is 8 years. Elton incurs initial direct costs of $10,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2019 and ending on December 31, 2025. Elton's implicit rate is 5% and they expect that collection of the $14,500 lease payments is probable. What is the principal balance in the Net Investment in Lease - Sale Type account after the second payment on December 31, 2019?
A) $98,402
B) $83,902
C) $113,000
D) $73,597

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The Answer of Elton Electronics leases testing equipment to Startup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $118,000. The cost of the equipment to Elton is $113,000 and the expected life of the testing equipment is 8 years. Elton incurs initial direct costs of $10,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2019 and ending on December 31, 2025. Elton's implicit rate is 5% and they expect that collection of the $14,500 lease payments is probable. What is the principal balance in the Net Investment in Lease - Sale Type account after the second payment on December 31, 2019?
A) $98,402
B) $83,902
C) $113,000
D) $73,597

Elton Electronics Leases Testing Equipment to Startup Corporation