On January 1, 2013, Evergreen Company leases an asset from Rocky, Inc. The asset leased is a special computer server with an estimated useful life of 6 years. The lease agreement specifies six annual payments of $220,000 beginning January 1, 2013, the inception of the lease, and at each December 31 thereafter through 2017. The present value of these payments at the appropriate interest rate is $968,158. Prior to signing the lease agreement, Evergreen Company considered purchasing the server for its cash price of $968,158. If Evergreen Company were to borrow the money to purchase the server the bank would charge a 10% interest rate. Which of the following entries will Rocky, Inc. record at December 31, 2013 when it receives its second lease payment? (Round your intermediate calculations and final answers to the nearest dollar amount.)

a) $74,816 credit to interest revenue.

b) $145,184 debit to lease receivable.

c) $96,816 credit to interest revenue.

d) $220,000 credit to cash.

Answer rating: 100% (QA)

Option A 74816 credit to interest revenue Given th... View the full answer