Kay Company, a lessor of office machines, purchased a new machine for $600,000 on January 1, 2006, which was leased the same day to Lee. The machine will be depreciated $55,000 per year. The lease is for a four-year period expiring January 1, 2010, and provides for annual rental payments of $100,000 beginning January 1, 2006. Additionally, Lee paid $64,000 to Kay as a lease bonus. In its 2006 income statement, what amount of revenue and expense should Kay report on this leased asset?
|
Revenue |
Expense |
|
|
a. |
$100,000 |
$0 |
|
b. |
$116,000 |
$0 |
|
c. |
$116,000 |
$55,000 |
|
d. |
$164,000 |
$55,000 |