Benedict Company leased equipment to Mark, Inc., on January 1, Year 2. The lease is for an 8-year period expiring December 31, Year 9. The first of 8 equal annual payments of $600,000 was made on January 1, Year 2. Benedict had purchased the equipment on December 29, Year 1, for $3,200,000. The lease is appropriately accounted for as a sales-type lease by Benedict. Assume that the present value at January 1, Year 2, of all rent payments over the lease term discounted at a 10% interest rate was $3,520,000. What amount of interest income should Benedict record in Year 3 (the second year of the lease period) as a result of the lease

$261,200    

Explanation:

The computation of the interest income for the year 3 is shown below:

DATE          Annual payment   Interest revenue  Reduction  Net investment

On Jan 1                                                                                       $3,520,000

On Jan 1       $600,000                 $0                    $600,000   $2,920,000

On Jan 1, year 2 $600,000    $292,000             $308,000    $2,612,000

On jan1, year 3   $600,000     $261,200           $338,800      $2,273,200

a progressive tax is a tax that imposes a lower tax rate on low-income earners compared to those with a higher income, making it based on the taxpayer's ability to pay. that means it takes a bigger percentage from high income earners than it does from low income people.