Question: On January 1, 2010, JCK Co. signed a contract for an eight-year lease of its equipment with a ten-year life. The present value of the

On January 1, 2010, JCK Co. signed a contract for an eight-year lease of its equipment with a ten-year life. The present value of the sixteen equal semiannual payments in advance equaled 85% of the equipment’s fair value. The contract had no provision for JCK, the lessor, to give up legal ownership of the equipment. Should JCK recognize rent or interest revenue in 2011, and should the revenue recognized in 2011 be the same or smaller than the revenue recognized in 2010?

2011 revenues recognized 2011 amount recognized compared to 2010

a. Rent The same

b. Rent Smaller

c. Interest The same

d. Interest Smaller

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