Question: Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $21 million.

Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $21 million. This noncancelable lease had the following terms:

  • Lease payments: $3,573,855 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025.
  • Lease term: 5 years (10 semiannual payments).
  • No residual value; no purchase option.
  • Economic life of equipment: 5 years.
  • Implicit interest rate and lessee's incremental borrowing rate: 9% semiannually.
  • Fair value of the computers at January 1, 2021: $25 million.

What is the interest revenue that Technoid would report for this lease in its 2021 income statement?

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