Details of this Paper

E18-22B (Interest Revenue from Installment Sale)Upper World Corporation sells tractor trailers on the installment plan. On October 1, 2014, Upper World entered into an installment-sale contract with Lower Sky Inc. for a 5-year period. Equal annual payment

Description

solution


Question

E18-22B (Interest Revenue from Installment Sale)Upper World Corporation sells tractor trailers on the installment plan. On October 1, 2014, Upper World entered into an installment-sale contract with Lower Sky Inc. for a 5-year period. Equal annual payments under the installment sale are $250,000 and are due beginning October 1, 2014.;Additional information;1. The amount that would be realized on an outright sale of similar trailer is $965,000.;2. The cost of the trailer sold to Lower Sky Inc. is $786,000.;3. The finance charges relating to the installment period are $285,000 based on an effective interest rate of 14.9%, which is appropriate.;4. Circumstances are such that the collection of the installments due under the contract is reasonably assured.;Instructions;What income or loss before income taxes should Upper World record for the year ended December 31, 2014, as a result of the transaction above?;(AICPA adapted)

 

Paper#75348 | Written in 18-Jul-2015

Price : $27
SiteLock