On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows:
 

Present value of $1 for n = 1	0.892857
Present value of $1 for n = 5	0.567427
Present value of an ordinary annuity for n = 5	3.604776
Present value of an annuity due for n = 5	4.037349

What is the amount of interest revenue that Average should recognize on the lease for the year ended December 31, 2016 (round the answer to the nearest dollar)?

$36,336

$37,017

$27,336

$28,017

Answer rating: 100% (QA)

Required solution Average company the lesse will record the lease at present v... View the full answer