What amount of income should Jones recognize for Year One? $2,256

The Jones Company only buys and then leases assets. It is neither a manufacturer nor a dealer of any items. On January 1, Year One, Jones buys equipment for $34,000 in cash. This asset is immediately leased for 8 years, its entire life. Annual payments are $5,800 to be made each January 1 beginning on January 1, Year One. Assume that the implicit interest rate profit built into the contract by Jones was 10 percent. However, the lessee’s incremental borrowing rate was only 8 percent per year. What amount of income should Jones recognize for Year One?
$2,256
$2,820
$3,400
$4,060

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