Greenway Company Signs a Six-Year Lease with Gearup Company That

Multiple Choice

Greenway Company signs a six-year lease with Gearup Company that requires a payment of $32,256 at the beginning of each year. The fair value of the leased equipment is $148,531.70. The interest rate implicit in the lease is 12%. The equipment has an estimated residual value of $20,000 at the end of the agreement, and the lessee does not guarantee the residual amount. Which of the following amounts should Greenway Company record as interest income at the end of the first year of the lease?

A) $13,953.08
B) $17,823.80
C) $21,694.52
D) $186,523.23