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What is the amount of profit on the sale

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solution


Question

Mayer Company leased equipment from Lennon Company on July 1, 2008, for an eight-year period expiring June 30, 2016. Equal annual payments under the lease are $300,000 and are due on July 1 of each year. The first payment was made on July 1, 2008.;The rate of interest contemplated by Mayer and Lennon is 8%. The cash selling price of the equipment is $1,861,875 and the cost of the equipment on Lennon's accounting records was $1,650,000.;Assuming that the lease is appropriately recorded as a sale for accounting purposes by Lennon, what is the amount of profit on the sale and the interest income that Lennon would record for the year ended December 31, 2008?;$0 and $0;$0 and $62,475;$211,875 and $62,475;$211,875 and $74,475

 

Paper#27178 | Written in 18-Jul-2015

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