Under the new ASU,what amount of interest revenue from the lease should SmithCo report in its December 31,2016,income statement?
A)$12,000.
B)$ 4,000.
C)$ 3,400.
D)$ 5,000.

Question

Quizplus · Accepted Answer

According to the new ASU, the interest revenue recognized on the lease should be calculated using the effective interest method. 
Effective Interest Rate= 10/(1-1/(1+10)^5) = 8.11%
Interest Revenue= Beginning Lease Receivable x Effective Interest Rate = $42,000 x 8.11% = $3,407.20 
Therefore, the amount of interest revenue that SmithCo should report in its December 31, 2016, income statement is $3,400, which is closest to option C.

Under the New ASU,what Amount of Interest Revenue from the Lease