On January 1, 2020, Commonwealth Inc. leases equipment to Tap Inc. The equipment has a fair value of $156,000, a carrying value of $80,000, an economic life of four years, and a lease term of three years. Commonwealth's incremental borrowing rate is 10% and there is a purchase option at the end of the lease of $10,000 that is reasonably expected to be executed by Tap at that time. The annual lease payment is $33,809.39, with the first payment due immediately on January 1, 2020. What is the gross profit (if any) recognized on January 1, 2020 by
On January 1, 2020, Commonwealth Inc. leases equipment to Tap Inc. The equipment has a fair value of $156,000, a carrying value of $80,000, an economic life of four years, and a lease term of three years. Commonwealth's incremental borrowing rate is 10% and there is a purchase option at the end of the lease of $10,000 that is reasonably expected to be executed by Tap at that time. The annual lease payment is $33,809.39, with the first payment due immediately on January 1, 2020. What is the gross profit (if any) recognized on January 1, 2020 by
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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![On January 1, 2020, Commonwealth Inc. leases equipment to Tap Inc.
The equipment has a fair value of $156,000, a carrying value of
$80,000, an economic life of four years, and a lease term of three
years. Commonwealth's incremental borrowing rate is 10% and there is
a purchase option at the end of the lease of $10,000 that is reasonably
expected to be executed by Tap at that time. The annual lease payment
is $33,809.39, with the first payment due immediately on January 1,
2020.
What is the gross profit (if any) recognized on January 1, 2020 by
Commonwealth Inc.?
A. $0
B. $76,000
$33,809
D. $80,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbddb4cdf-9551-45b9-bc52-bfc5a12ad6b5%2Fc4900112-ae64-4396-9c79-c384daeb44a7%2Futwiay_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2020, Commonwealth Inc. leases equipment to Tap Inc.
The equipment has a fair value of $156,000, a carrying value of
$80,000, an economic life of four years, and a lease term of three
years. Commonwealth's incremental borrowing rate is 10% and there is
a purchase option at the end of the lease of $10,000 that is reasonably
expected to be executed by Tap at that time. The annual lease payment
is $33,809.39, with the first payment due immediately on January 1,
2020.
What is the gross profit (if any) recognized on January 1, 2020 by
Commonwealth Inc.?
A. $0
B. $76,000
$33,809
D. $80,000
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