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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

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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
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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